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Lake Stevens Marina has estimated that fixed costs per month are $350,000 and variable cost per...

Lake Stevens Marina has estimated that fixed costs per month are $350,000 and variable cost per dollar of sales is $0.30.

  1. What is the break-even point per month in sales dollars?

  1. What level of sales dollars is needed for a monthly profit of $70,000?

  1. For the month of July, the marina anticipates sales of $1,000,000. What is the expected level of profit?

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Answer #1

a.

Sale = $1

Variable cost = $0.30

Contribution margin = $0.70

Contribution margin ration = (0.7/1)*100 = 70%

Break even point = Fixed cost/ contribution margin ratio

Break even point = 350,000/70%

Break even point = $500,000

a.

Estimated profit = $70,000

Fixed cost = 350,000

Contribution = 350,000+70,000 = $420,000

Sales = Contribution / Contribution margin ratio

Required sales = 420,000/70%

Required sales = $600,000

a.

Anticipated sale = 1,000,000

Contribution margin= 1,000,000*70% = 700,000

Expected level of profit = Contribution - Fixed cost

Expected level of profit = 700,000-350,000

Expected level of profit = $350,000

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