Cost-Volume-Profits and Vending Machines:
Riccardo Food Services Company operates and services soft drink vending machines located in restaurants, gas stations, and factories in four southeastern states. The machines are rented from the manufacture. In addition, Riccardo must rent the space occupied by its machines. The following expense and revenue relationships pertain to a contemplated expansion program of 40 machines.
Fixed monthly expense follow:
Machine rental: 40 machines @ $53.50 $2,140
Space rental: 40 locations @ $38.80 $1,552
Part-time wages to service the additional 40 machines $2,008
Other fixed costs 300
Total monthly fixed costs $6,000
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Per Unit
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Per $100 of Sales
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Selling price
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$1.00
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100%
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Cost of snack
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.80
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80
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Contribution margin
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.20
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20%
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These questions relate to the above data unless otherwise noted. Consider each question independently.
1. What is the monthly break-even point in number of units? In dollar sales?
2. If 40,000 units were sold, what would be the company's net income?
3. If the space rental cost were doubled, what would be the monthly break-even point in number of units? In dollar sales?
4. If, in addition to the fixed rent, Riccardo Food Services Company paid the vending-machine manufacture 2¢ per unit sold, what would be the monthly break-even point in number of units? In dollar sales? Refer to the original data.
5. If, in addition to the fixed rent, Riccardo paid the machine manufacture 4¢ for each unit sold in excess of the break-even point, what would the new income be if 40,000 units were sold? Refer to the original data.