Enriquez Food Services Company operates and services snack vending machines located in restaurants, gas stations, and factories in four southwestern states

2-A2

Enriquez Food Services Company operates and services snack vending machines located in restaurants, gas stations, and factories in four southwestern states. The machines are rented from the manufacturer. In addition, Enriquez must rent the space occupied by its machines. The follow expense and revenue relationships pertain to a contemplated expansion program of 40 machines.

Machine rental: 40 machines @ $53.50                                    $2,140

Space rental: 40 locations @ 38.80                                              1,552

Partime wages to service the additional 40 machines              2,008

Other fixed costs                                                                                 300

Other data follow:

Selling Price                    $1.00                                                                      100%

Cost of Snacks                    .80                                                                         80%

These questions relate to the given data unless otherwise noted. Consider each question independently.

a.)    What is the monthly break-even point in number of units (snacks)? In dollar sales?

b.)    If 40,000 units were sold, what would be the company’s net income?

c.)     If the space rental cost was double, what would be the monthly break-even point in number of units? In dollar sales?

d.)    Refer to the original data. If, in addition to the fixed space rent, Enriquez Food Service Company paid the vending machine manufacturer $.02 per unit sold, what would be the monthly break-even point in the number of units? In dollar sales?

e.)    Refer to the original data. If, in addition to the fixed rent, Enriquez paid the machine manufacturer $.05 for each unit sold in excess of the break-even point, what would the new net income be if 40,000 units were sold?