The report should comprise the followings requirements: Use the information in Tables III and IV to prepare a contribution margin or cost-volume-profit income statement. Compute the contribution margin ratios for each semester. Then compute an overall simple average of the semesters. What observations can you make about the contribution margin over time? Using average data computed in 1, compute the breakeven point in sales dollars for the Snack Shop before accepting Food Funds.
Compare the contribution margin ratios computed in 1 and 2 above to the gross profit percentages by product group in Table I. What factors could contribute to differences between these measures? Which give the most accurate measure of breakeven? What actions can the Snack Shop take to increase overall contribution margin ratio? Assuming that the Shop accepts Food Funds in the spring 2013 semester, prepare a pro-forma contribution margin income statement. Use the average sales and cost data presented for previous semesters and the new costs of Food Funds to complete this exercise.
Show computations for each line. Using the contribution margin from 4, compute the breakeven point in sales dollars for the snack Shop after accepting Food Funds. How many more sales dollars must be generated to break even after accepting Food Funds? Is this volume attainable by the Shop? What must the Shop do to achieve and then accommodate the increase in sales?
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