Fleet Skating Center (Cost Profit Volume)

                                             Cost-Profit Volume Opening Story: Fleet skate philia 1. Break regular(a) point occurs when the level of sales at which profit is zero. If enough skaters visit the outdoor ice glide rink to generate 115,000 ( $100,000 + $15,000) in contribution margin, then all of the situated approach will be finish offed and the go with will have got managed to at least break even-that to introduce neither profit nor loss but but cover all of its cost. This will keep critics of the skating center quite.

2. In order for Fleet Skating Center to break even in sales, the contribution margin must equal to fixed cost ($115,000). If contribution margin equals 115,000 then net income would be 0. This shows that neither profit or loss but just cover all its cost division margin ¦¦¦¦. 115,000          less(prenominal)(prenominal) fixed expenses ¦¦¦¦¦.. 115,000 Net Income ¦¦¦¦¦¦¦ -0- *Assume that each skater counterbalances $8.00 per ticket ( Contribution margin (Per Skater) = 115,000/82,500 = 1.39 Variable cost per unit is: 8- 1.39 = $6.61 3. When we say the cost is inconstant, we mean it variable with respect to the volume generating output. In this case, the operating(a) expenses and the cost of equipment will be expected to go up as activities change. If the company is profitable, the sale volume will in addition increase.

At the result, I conclude that, incline skating rink, path hockey, dances, or any other activities cause changes in variable cost, especially the cost that I mentioned above. Other variable costs are: utilities cost and cost of labors.

$100,000 debt service and the season $15,000 judgeship bung paid to the company managing the rink will catch ones breath fixed. Other remaining fixed costs are rent, depreciation of equipment, property taxes, and insurance.



( Note: rent, depreciation, taxes and insurance are not listed in the opening story, but I think every businesses pay rent, taxes and insurance, therefore I assume these costs remain fixed) 4. germane(predicate) range is the range of activity within which the assumptions about variable cost and fixed cost are valid. If there is a big enough change in activity, the fixed costs may change. In this case, if more skaters visit Fleet Skating Center, another staking center might have to be built. If this is the case, the managing fee will also increase double (15,000 x 2 = $30,000).

5. Its a fixed cost within a pertinent range. The skating center will pay $50,000 if the incline amounting less than $30,000. If there is change in activity, the fixed cost may change. In this case, if the incline skating amounting to $300,000, Fleet Staking Center would have to purchase an additional policy.

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