Giselle Rodriguez owns Rodriguez Art Studio Ltd. in Havana, Cuba. It has overhead costs of $3000...

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Giselle Rodriguez owns Rodriguez Art Studio Ltd. in Havana, Cuba. It has overhead costs of $3000 per month. The variable cost and price are $5 and $20 respectively, per person per lesson. There are typically 500 customers each month although the firm's maximum capacity is 600 clients. a. Using the grid paper found on Managebac, construct a fully labeled break-even chart, and identify the break even quantity and margin of safety. Show all your working. (8 marks) Suppose that rent increases, bringing the monthly overheads to $4000 per month. Giselle also reduces her price to $17 which raises demand to 520 clients per month. b. Calculate the new break-even quantity. Showing all your working. (4 marks) c. Explain whether the change in price was a sensible decision. Giselle Rodriguez owns Rodriguez Art Studio Ltd. in Havana, Cuba. It has overhead costs of $3000 per month. The variable cost and price are $5 and $20 respectively, per person per lesson. There are typically 500 customers each month although the firm's maximum capacity is 600 clients. a. Using the grid paper found on Managebac, construct a fully labeled break-even chart, and identify the break even quantity and margin of safety. Show all your working. (8 marks) Suppose that rent increases, bringing the monthly overheads to $4000 per month. Giselle also reduces her price to $17 which raises demand to 520 clients per month. b. Calculate the new break-even quantity. Showing all your working. (4 marks) c. Explain whether the change in price was a sensible decision.

Answer rating: 100% (QA)

Answer Formulas Used Contribution margin ratio 100 Variable cost ratio Contribution margin ratio Co... View the full answer