After spilling his plate of spaghetti all over his friend's apartment floor, George rented a carpet...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
After spilling his plate of spaghetti all over his friend's apartment floor, George rented a carpet cleaner to clean it up. In doing so, he realized just how easy it is to clean carpets! He started his own business, diving in head-first by purchasing a carpet cleaner, to make a little money. His friends are keen to use his services to clean their rented apartments before handing back keys to the landlords. George charges $70 to clean the main areas of an apartment. In addition to his equipment costs, he uses a cleaning solution on the carpet, which costs about $7 per unit cleaned. Because of his class load, George currently cleans just 4 apartments per month, but he is thinking about asking his roommate to join him so that he can increase the volume of sales. (a) Your Answer Correct Answer Your answer is correct. At his current level of activity, George's degree of operating leverage (DOL) is 1.5. How much are his monthly fixed costs? Fixed costs 64 per month i b) Your answer is correct. If George's roommate helps in this business, how much more income can the business make if sales volume increases by 50%? (George would share his season tickets to the local NHL team with his roommate in exchange for his time.) Increase in income 126 (c) Your answer is partially correct. Let's assume, instead, that the roommate thing doesn't work out. George now wants to consider other ways to increase his profit in this business. (c1) If he increases his selling price by 20% and maintains the same volume of four units per month, does it affect his DOL? (Round answer to 2 decimal places, e.g. 15.25.) Effect on DOL 1.35 Increase Increase Decrease No effect (c2) If so, what does this changed DOL mean for Operating income will be affected less by a change in sales. After spilling his plate of spaghetti all over his friend's apartment floor, George rented a carpet cleaner to clean it up. In doing so, he realized just how easy it is to clean carpets! He started his own business, diving in head-first by purchasing a carpet cleaner, to make a little money. His friends are keen to use his services to clean their rented apartments before handing back keys to the landlords. George charges $70 to clean the main areas of an apartment. In addition to his equipment costs, he uses a cleaning solution on the carpet, which costs about $7 per unit cleaned. Because of his class load, George currently cleans just 4 apartments per month, but he is thinking about asking his roommate to join him so that he can increase the volume of sales. (a) Your Answer Correct Answer Your answer is correct. At his current level of activity, George's degree of operating leverage (DOL) is 1.5. How much are his monthly fixed costs? Fixed costs 64 per month i b) Your answer is correct. If George's roommate helps in this business, how much more income can the business make if sales volume increases by 50%? (George would share his season tickets to the local NHL team with his roommate in exchange for his time.) Increase in income 126 (c) Your answer is partially correct. Let's assume, instead, that the roommate thing doesn't work out. George now wants to consider other ways to increase his profit in this business. (c1) If he increases his selling price by 20% and maintains the same volume of four units per month, does it affect his DOL? (Round answer to 2 decimal places, e.g. 15.25.) Effect on DOL 1.35 Increase Increase Decrease No effect (c2) If so, what does this changed DOL mean for Operating income will be affected less by a change in sales.
Expert Answer:
Related Book For
Data Analysis and Decision Making
ISBN: 978-0538476126
4th edition
Authors: Christian Albright, Wayne Winston, Christopher Zappe
Posted Date:
Students also viewed these accounting questions
-
A cleaning company cleaned 70 carpets in December. They used the following resources: Labor.....................................500 hours at $13 per hour Solvent.................................100...
-
First Class Maids Company, the cleaning service, started the preparation of its adjusted trial balance as follows: During the 12 months ended December 31, 2012, First Class Maids a. used supplies of...
-
George Seby is thinking about doing some speculating in interest rates. He thinks rates will fall and, in response, the price of Treasury bond futures should move from 9215, their present quote, to a...
-
A 4-ft-high, 3-ft-diameter cylindrical water tank whose top is open to the atmosphere is initially filled with water. Now the discharge plug near the bottom of the tank is pulled out, and a water jet...
-
On November 7, 2011, Ortez Company borrows $150,000 cash by signing a 90-day, 8% note payable with a face value of $150,000. (1) Compute the accrued interest payable on December 31, 2011, (2) Prepare...
-
1. Which pricing tactics does each company utilize? Evaluate the effectiveness of each one of these tactics for the particular pizza chain. 2. How might the current price wars change the pricing...
-
Show that the residuals from a linear regression model can be expressed as $\mathbf{e}=(\mathbf{I}-\mathbf{H}) \boldsymbol{\varepsilon}$.
-
The income statement of Jones Company for the year ended December 31, 2010, follows. Required a. Compute the net earnings remaining after removing nonrecurring items. b. Determine the earnings (loss)...
-
Ending book value ($) $181,000 (new) Some trucks purchased by a U-Haul franchise should last 7 years. The purchase price was $176,000. Shipping costs were $5,000. The trade-in (salvage value) is...
-
Sam Mc Kenzy is a founder and CEO of McKenzy Restaurants Inc., a regional company. Sam is considering opening several new restaurants. Sally Thorton, the company CFO has been put in charge of the...
-
The pin is made of a material having a failure shear stress of Tfail = 140 MPa. Figure Part A 80 kN 1 of 1 > Determine the minimum required diameter of the pin to the nearest mm. Apply a factor of...
-
Create the AllDayEvent class, a subclass of the Event class to help you store an AllDayEvent. This will keep the Event class functionalities, with one exception: The constructor will receive the...
-
Newhard Company assigns overhead cost to jobs on the basis of 1 1 2 % of direct labor cost. The job cost sheet for Job 3 1 3 includes $ 2 9 , 8 1 6 in direct materials cost and $ 1 0 , 7 0 0 in...
-
Please make a Creature class that has: Private fields for: (string) name, (string) description, (int) endurance, (string) filename, an array of phrases (size of at least 3) that the creature might...
-
2. Your firm processes 50,000 checks each year with an average face.value of $50 per check. Col- lecting on these checks requires two days of mail float, three days of processing float, and one day...
-
Assuming all import statements are given, use JavaFX and code a complete start method that will create a label as "Please click on the button..." and a button called clickMe and displayed name called...
-
You are preparing journal entries to record the following transactions and events for April using a job order cost accounting system: a) Purchased raw materials on credit, $69,000 The debit account...
-
A routine activity such as pumping gasoline can be related to many of the concepts studied in this text. Suppose that premium unleaded costs $3.75 per gal. Work Exercises in order. Use the...
-
The annual return on each of four stocks for each of the next five years is assumed to follow a normal distribution, with the mean and standard deviation for each stock, as well as the correlations...
-
The human resources manager of DataCom, Inc., wants to examine the relationship between annual salaries (Y) and the number of years employees have worked at DataCom (X). These data have been...
-
Equation (4.10) for covariance indicates exactly what covariance is: the weighted average of products of deviations from the means, weighted by the joint probabilities. However, the computing formula...
-
Reconsider the data from Problem 57 (Orpheum Productions lighting enhancement). Assume that any money not invested in the lighting enhancements will be placed in an interest-bearing account earning...
-
An investor has \($100,000\) to invest in a business venture, or she can earn 10 percent/year with a \($100,000\) certificate of deposit for 4 years. Three possible business ventures have been...
-
This problem is related to Problem 8. Jeff has $10,000 to invest for a period of 5 years. The following three alternatives are available at his bank: Data from problem 8 Jeff has $10,000 to invest...
Study smarter with the SolutionInn App