Question 1 - E

1) Ethio Food Services Company operates and services snack vending machines located in
restaurants, gas station, factories, etc. The machines are rented from the manufacturer. In
addition, Ethio must rent the space occupied by its machines. The following expense and
revenue relationships pertain to a contemplated expansion program of 20=80 machines.

Fixed monthly expenses follow:

Machine rental: 20(80) machine @ Br. 26.75 (22.10) Br. 535 1,768

Space rental: 2(80) locations @ Br. 14.40 (20.00) 288 1,600

Part-time wages to service the additional 20(80) machines 727 500

Other fixed costs
50 132
Total monthly fixed costs
Br. 1600 4,000

Other data follows:

Per unit Per Br. 100 of sales

Selling price Br. 0.50 ( 1.0 ) 100%

Cost of snack 0.40 ( 0.68 ) 80 (68)

Contribution margin Br. 01.10 ( 0.32 ) 20% (32%)

Instructions: These questions relate to the above data unless otherwise noted. Consider each
question independently.

a) What is the monthly BEP (in units and in birrs)?

b) If 20,000 units were sold, what would be the company’s net income?
c) If the space rental cost were doubled, what would be the monthly BEP (in units and in
birrs)?
d) If, in addition to the fixed rent, Ethio Food Services Company paid the vending machine
manufactures 1 cent per units sold, what would be the monthly BEP (in units and in birrs)
e) If, in addition to the fixed rent, Ethio paid the machine manufacturer 2 cents for each unit
sold in excess of the BEP. What would the new net income be if 20,000 units were sold?
Refer to the original data.

Solution Question 1:

If, in addition to the fixed rent, paid the machine manufacturer for each unit sold in excess of the
BEP. What would the new net income be if 0,000 units were sold? Refer to the original data.

https://quizlet.com/51250720/acct-exam-2-flash-cards/

https://courses.lumenlearning.com/tcc-managacct/chapter/cost-volume-profit-analysis-
calculations/
If, in addition to the fixed rent, Ethio paid the machine manufacturer 2 cents for each unit sold in
excess of the BEP. What would the new net income be if 20,000 units were sold? Refer to the
original data.