Question 6 Shell Co. is a gas station that is located at a downtown intersection in...
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Question 6 Shell Co. is a gas station that is located at a downtown intersection in Toronto. Two years after opening the gas station, Shell built a convenience store located in the land adjacent to the convenience store and opened it to serve gas station customers. Recently, a national chain opened a gas station and convenience store across the street from Shell, which has decreased sales due to the additional competition. In an effort to remain competitive, Shell implemented a promotional event; for every $10 purchase made at Shell, the customer would receive a $1 coupon that can be redeemed toward the purchase of gasoline. Based on Shell's operating data throughout the last few years, the average customer purchases 15 gallons of gasoline at $2.50 per gallon. Below are Shell's sales results for an average month, prior to the introduction of the coupon promotion: Note: Not included in the information below is Shell's monthly cost of printing the coupons of approximately $500. Coupons are issued on the basis of total purchases regardless of whether the purchases are paid in cash or paid by redeeming coupons. Assume that coupons are distributed to customers for 75 percent of the total sales. Also assume that all coupons distributed are used to purchase gasoline. Gasoline Food and beverages Other products Labour station attendants. Labour supervision Rent, power, supplies and other Depreciation (pumps, computers, counters, fixtures and building) Sales $100,000 60,000 40,000 Cost of sales (Per unit or % of retail) $1.875 per gallon 60% 50% Other costs $10,000 2,500 40,000 7,500 Required: 1. If Shell Co. implements the coupon program, calculate the profit (loss) before tax. Please present your response in the form of a contribution format income statement and ensure all appropriate headings are included. Assume the following: 14 pts • Sales volume remains constant • Coupons are used to purchase gasoline • Sales mix remains constant 2. If Shell Co. implements the coupon program, calculate the breakeven sales (in dollars). Assume that the sales mix remains constant. 3. Determine the composition of Shell Co.'s total breakeven sales dollars across the three product lines: gas; food and beverages; and other products. Question 6 Shell Co. is a gas station that is located at a downtown intersection in Toronto. Two years after opening the gas station, Shell built a convenience store located in the land adjacent to the convenience store and opened it to serve gas station customers. Recently, a national chain opened a gas station and convenience store across the street from Shell, which has decreased sales due to the additional competition. In an effort to remain competitive, Shell implemented a promotional event; for every $10 purchase made at Shell, the customer would receive a $1 coupon that can be redeemed toward the purchase of gasoline. Based on Shell's operating data throughout the last few years, the average customer purchases 15 gallons of gasoline at $2.50 per gallon. Below are Shell's sales results for an average month, prior to the introduction of the coupon promotion: Note: Not included in the information below is Shell's monthly cost of printing the coupons of approximately $500. Coupons are issued on the basis of total purchases regardless of whether the purchases are paid in cash or paid by redeeming coupons. Assume that coupons are distributed to customers for 75 percent of the total sales. Also assume that all coupons distributed are used to purchase gasoline. Gasoline Food and beverages Other products Labour station attendants. Labour supervision Rent, power, supplies and other Depreciation (pumps, computers, counters, fixtures and building) Sales $100,000 60,000 40,000 Cost of sales (Per unit or % of retail) $1.875 per gallon 60% 50% Other costs $10,000 2,500 40,000 7,500 Required: 1. If Shell Co. implements the coupon program, calculate the profit (loss) before tax. Please present your response in the form of a contribution format income statement and ensure all appropriate headings are included. Assume the following: 14 pts • Sales volume remains constant • Coupons are used to purchase gasoline • Sales mix remains constant 2. If Shell Co. implements the coupon program, calculate the breakeven sales (in dollars). Assume that the sales mix remains constant. 3. Determine the composition of Shell Co.'s total breakeven sales dollars across the three product lines: gas; food and beverages; and other products.
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a Cost of sales Per unit or of Sales Gasoline 1 875 per gallon 60000 gallons 60 Other products 2500 ... View the full answer
Related Book For
Accounting Information Systems Controls and Processes
ISBN: 978-1119329565
3rd edition
Authors: Leslie Turner, Andrea Weickgenannt, Mary Kay Copeland
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