| Course | BUS 510 Managerial Accounting |
|---|---|
| Module | Module 4 |
| Paper type | Cost-volume-profit analysis |
| Length | About 1,078 words, 6 pages |
| Format | APA 7 student paper |
| School | Aspen University |
| Program | MBA |
| Updated | October 2026 |
Free sample paper for BUS 510 Module 4
How Many Bay-Hours Pay the Rent? Cost Behavior and Cost-Volume-Profit Analysis for an Indoor Golf Simulator Lounge
Student Name
MBA Program, Aspen University
BUS 510: Managerial Accounting
Instructor Name
Month Day, Year
How Many Bay-Hours Pay the Rent? Cost Behavior and Cost-Volume-Profit Analysis for an Indoor Golf Simulator Lounge
Derek Lindahl opened a composite indoor golf lounge in Omaha, Nebraska, with six simulator bays that let customers play famous courses on screens, practice their swings and compete in leagues. Customers rent bays by the hour, and the lounge earns additional revenue from food and drinks, which it treats as a separate business line. After eight months, Lindahl knows his average monthly sales but not how close he is to losing money in a slow month, or how many more hours he needs to reach his profit goal. This paper analyzes his costs and volume to answer those questions.
Classifying the Costs
Lindahl's costs were first sorted by whether they move with use of the bays. The unit of volume is the bay-hour, one bay rented for one hour, at an average price of $50.
Variable costs total $9 per bay-hour, and fixed costs total $42,000 per month. Utilities were a mixed cost: a base charge for heating, cooling and lighting that is fixed, and the electricity drawn by simulators, which rises with use. Separating the two using Lindahl's monthly bills placed $1,200 in fixed costs and $2.40 per bay-hour in variable costs. Staffing is fixed only within a range; above about 2,000 bay-hours a month, Lindahl would need another part-time attendant.
| Cost | Behavior | Amount |
|---|---|---|
| Card processing fees | Variable | $1.60 per bay-hour |
| Electricity for simulators and projectors | Variable | $2.40 per bay-hour |
| Equipment wear and replacement of mats, balls and screens | Variable | $3.50 per bay-hour |
| Cleaning supplies and towels | Variable | $1.50 per bay-hour |
| Rent | Fixed | $14,000 per month |
| Salaried manager and base staff | Fixed | $16,500 per month |
| Simulator equipment leases | Fixed | $6,000 per month |
| Insurance and base utilities | Fixed | $3,500 per month |
| Marketing | Fixed | $2,000 per month |
Contribution Margin
Each bay-hour sells for $50 and costs $9 in variable costs, leaving a contribution margin of $41, or 82% of the price. Each additional hour sold adds $41 toward fixed costs and, once those are covered, to profit. This high ratio is typical of businesses with expensive equipment and low costs per use.
Break-Even and Target Volumes
Dividing the month's $42,000 of fixed costs by the $41 each bay-hour contributes is 1,024.4, so the lounge needs about 1,025 bay-hours a month to cover its costs. The lounge is open 14 hours a day, so six bays offer about 2,520 bay-hours in a 30-day month, and break-even requires about 41% use.
Lindahl's goal is a monthly profit of $10,000. Adding the target to fixed costs and dividing by the contribution margin gives $52,000 divided by $41, or about 1,269 bay-hours, roughly 50% use.
Margin of Safety and Sensitivity
Over the past eight months, the lounge has averaged 1,450 bay-hours a month. At that volume, total contribution margin is $59,450 and profit is $17,450. The margin of safety, the amount by which actual volume exceeds break-even, is 425 bay-hours, or about 29% of current volume. Sales could fall by nearly a third before losses begin.
Because most costs are fixed, profit is highly sensitive to volume. Dividing total contribution margin by profit gives 3.4, which means that a 10% change in bay-hours produces about a 34% change in profit. This sensitivity works in both directions: a busy month is very profitable, and a slow month erases profit quickly.
A Summer Scenario
Demand for indoor golf falls in summer, when customers play outdoors. If volume drops to 900 bay-hours in July, contribution margin would be $36,900 against $42,000 of fixed costs, a loss of $5,100 for the month. Three such months would consume much of a strong winter month's profit.
Testing a Price Change
Lindahl has considered raising the weekend price from $50 to $55 per bay-hour. If the whole month moved to $55, the contribution margin would rise to $46, and break-even would fall to $42,000 divided by $46, or about 914 bay-hours. The question is how many customers would leave. At current volume, the higher price would raise profit to $24,700 if no customers left, and volume could fall to about 1,293 bay-hours, a loss of roughly 11% of business, before profit dropped below today's $17,450. Because weekend bays are usually full while weekday afternoons are quiet, a weekend-only increase paired with a weekday discount is the more promising version of the idea.
The Food and Drink Line
Food and beverage sales were excluded from the analysis above because they have their own costs and staff. They do, however, depend on bay-hours: customers spend an average of $14 on food and drink per bay-hour, with variable costs of about $5, adding roughly $9 of contribution per bay-hour. Including that contribution would lower break-even to about 840 bay-hours, which is one reason Lindahl should treat the two lines as linked when he sets prices.
How Costs Behave in Practice
Cost-volume-profit analysis assumes that costs behave in straight lines within a relevant range (Datar & Rajan, 2021). Research shows reality is less tidy. Anderson et al. (2003) found that overhead costs of large firms climbed by roughly 0.55% when sales grew 1%, yet shrank by only about 0.35% when sales slipped by the same 1%, because managers hesitate to shed staff and space after a dip that may prove temporary. Costs are sticky. Banker et al. (2014) found that firms facing more uncertain demand tend to choose more rigid cost structures with greater capacity. For Lindahl, both findings matter: in summer, his costs will not fall on their own, and his decision to lease six bays rather than four already committed him to a large fixed base.
Recommendations
First, Lindahl should negotiate a seasonal rent arrangement or sublet two bays to a golf instructor during summer, converting part of a fixed cost into a shared one. Second, he should schedule part-time staff hours to match bookings rather than maintaining full staffing in quiet months. Third, he should build summer demand with youth camps and corporate events. Fourth, he should keep a cash reserve of at least two months of potential losses, about $10,000, before the summer begins.
Conclusion
The lounge breaks even at about 1,025 bay-hours a month and currently operates 29% above that level. Its high contribution margin makes it very profitable when busy and vulnerable when quiet. Cost-volume-profit analysis shows the size of that vulnerability, and research on sticky costs explains why Lindahl must act before summer rather than wait for costs to adjust.
References
Anderson, M. C., Banker, R. D., & Janakiraman, S. N. (2003). Are selling, general, and administrative costs "sticky"? Journal of Accounting Research, 41(1), 47-63. https://doi.org/10.1111/1475-679X.00095
Banker, R. D., Byzalov, D., & Plehn-Dujowich, J. M. (2014). Demand uncertainty and cost behavior. The Accounting Review, 89(3), 839-865. https://doi.org/10.2308/accr-50661
Datar, S. M., & Rajan, M. V. (2021). Horngren's cost accounting: A managerial emphasis (17th ed.). Pearson.
BUS 510 Module 4 instructions, in plain terms
Aspen's catalog for BUS 510 emphasizes using accounting data for management decisions and profitability, and a module on cost behavior typically asks students to classify costs and perform cost-volume-profit analysis. The Module 4 instructions in your classroom set the details; this example works through a full analysis for one business. Classify costs as fixed, variable or mixed, and explain your reasoning for any that are unclear. Calculate what each unit contributes, in dollars and as a share of price. Work out where profit reaches zero and how much more volume a profit goal requires. Measure the margin of safety and how sensitive profit is to changes in volume. Test at least one realistic scenario, such as a slow season or a price change. State the assumptions of the model and when they fail. Recommend actions based on the results.
How this BUS 510 Module 4 example is built
The paper opens with Derek Lindahl's lounge, which rents six golf simulator bays by the hour. A table classifies costs: card fees, power, equipment wear and supplies vary with bay-hours, while rent, salaried staff, simulator leases, insurance and marketing are fixed. Contribution margin is $41 on a $50 bay-hour, or 82%. Break-even is $42,000 divided by $41, or about 1,025 bay-hours, roughly 41% of the 2,520 available. A $10,000 target needs 1,269. At an expected 1,450 bay-hours, profit is $17,450, the margin of safety is 29% and profit moves about 3.4 times as fast as sales. A summer month at 900 bay-hours loses $5,100. Anderson, Banker and Janakiraman's research on sticky costs and Banker, Byzalov and Plehn-Dujowich's work on demand uncertainty inform four actions.
Reading the BUS 510 Module 4 grading rubric
Cost-volume-profit papers in an MBA accounting course are marked on correct classification, accurate calculations, clear statement of assumptions and useful interpretation. This example shows every formula in words with its inputs, so each result can be verified. Classification decisions are explained, including which costs are fixed only within a relevant range. The analysis goes beyond break-even to margin of safety, profit sensitivity and a seasonal scenario, which is where interpretation credit is earned. The model's straight-line assumptions come from the Datar and Rajan text, while Anderson, Banker and Janakiraman's Journal of Accounting Research article and Banker, Byzalov and Plehn-Dujowich's article in The Accounting Review show where real cost behavior departs from the model. Recommendations connect directly to the numbers, such as shifting fixed costs where possible before the summer.
Common BUS 510 Module 4 mistakes, and how to avoid them
The most common mistake in Module 4 is misclassifying costs, especially mixed costs that have both fixed and variable parts. Explain your classification. Another is stopping at break-even; instructors expect you to use the analysis for decisions, such as setting a target, testing a price change or measuring risk. Keep units consistent; if volume is measured in hours, every per-unit figure must be per hour. State the assumptions of the model, including constant prices and a single product or a fixed mix, and say when they would fail. Avoid treating fixed costs as fixed forever; they are fixed only within a range of activity and a time period. Check your arithmetic by computing profit at your break-even volume, which should be zero. Finally, connect results to what the manager can actually change: price, variable cost, fixed cost or volume.
Write yours, or have the desk draft it
This paper is an original model document written by our desk, not a submitted student paper and not an official Aspen University document. Read it for the moves, then write your own to the instructions in your classroom. If you want one built to your exact prompt and rubric, the first custom sample is free and arrives in 24 to 48 hours.
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BUS 510 Module 4 questions, answered
What does BUS 510 Module 4 usually ask for?
Aspen's BUS 510 covers cost behavior and cost-volume-profit analysis in this module, so classifying costs and computing break-even, target profit and margin of safety for a business is typical. Check your classroom prompt.
What is contribution margin?
Revenue minus variable costs, per unit or in total; it is the amount each sale contributes toward covering fixed costs and then toward profit.
How do you calculate break-even volume?
Divide total fixed costs by the contribution margin per unit; the result is the number of units at which profit is zero.
Where can I find a free BUS 510 Module 4 sample paper?
The complete analysis is shown above: an indoor golf simulator lounge with costs classified, break-even at 1,025 bay-hours, a target profit volume, margin of safety and a summer scenario.
What is the margin of safety?
How far expected volume sits above the break-even point, usually given as a share of expected volume, so a manager knows how much business can disappear before the month turns red.