Question

Contribution Margin Ratio, Break-Even Sales Revenue, Sales Revenue for Target Profit

Schylar Pharmaceuticals, Inc., plans to sell 140,000 units of antibiotic at an average price of $17 each in the coming year. Total variable costs equal $761,600. Total fixed costs equal $7,500,000.

**Required:**

**1.** What is the contribution margin per unit?
Round your answer to the nearest cent.

$

What is the contribution margin ratio? Round your answer to two decimal places. (Express as a decimal-based answer rather than a whole percent amount.)

**2.** Calculate the sales revenue needed to break
even. Round your answer to the nearest dollar.

$

**3.** Calculate the sales revenue needed to
achieve a target profit of $235,000. Round your answer to the
nearest dollar.

$

**4.** ** What if** the
average price per unit increased to $18.50? Recalculate the
following:

a. Contribution margin per unit. Round your answer to the
nearest cent.

$

b. Contribution margin ratio. Enter your answer as a decimal value (not a percentage), rounded to four decimal places.

c. Sales revenue needed to break even. In your computations, use
your rounded answer from part (4-b) above for the contribution
margin ratio, and round your final answer to the nearest
dollar.

$

d. Sales revenue needed to achieve a target profit of $235,000.
In your computations, use your rounded answer from part (4-b) above
for the contribution margin ratio, and round your final answer to
the nearest dollar.

$

Answer #1

Variable cost per unit = Total Variable cost/Number of Units

= 761,600/140,000

= $5.44

Contribution Margin per Unit = Selling price per unit – Variable cost per unit

= 17-5.44

= $11.56

CM Ratio = Contribution Margin/Sales

= 11.56/17

= 0.68

2.Break even sales revenue = Fixed costs/CM ratio

= 7,500,000/0.68

= $11,029,411.76

3.Sales revenue required = (Target Profit+ Fixed costs)/CM Ratio

= (235,000 + 7,500,000)/0.68

= $11,375,000

4.Contribution Margin per Unit = 18.50-5.44 = $13.06

CM Ratio = 13.06/18.50

= 0.7059

Break even revenue = 7,500,000/0.7059

= $10,624,734

Sales Revenue required = (235000+7,500,000)/0.7059

= $10,957,643

Contribution Margin Ratio, Variable Cost Ratio, Break-Even Sales
Revenue
The controller of Sandoval Company prepared the following
projected income statement:
Sales
$90,000
Total Variable cost
79,000
Contribution
margin
$11,000
Total Fixed cost
6,500
Operating income
$4,500
Required:
1. Calculate the contribution margin ratio.
Round your answer to the nearest whole number.
%
2. Calculate the variable cost ratio. Round
your answer to the nearest whole number.
%
3. Calculate the break-even sales revenue for
Sandoval. If required, round your answer...

Break-Even Sales: Sales for Target Profit
Health-Temp Company is a placement agency for temporary nurses.
It serves hospitals and clinics throughout the metropolitan area.
Health-Temp Company believes it will place temporary nurses for a
total of 21,000 hours next year. Health-Temp charges the hospitals
and clinics $120 per hour and has variable costs of $96.00 per hour
(this includes the payment to the nurse). Total fixed costs equal
$484,800.
Required:
1. Calculate the contribution margin per unit
and the contribution...

Break-Even Sales: Sales for Target Profit
Health-Temp Company is a placement agency for temporary nurses.
It serves hospitals and clinics throughout the metropolitan area.
Health-Temp Company believes it will place temporary nurses for a
total of 23,500 hours next year. Health-Temp charges the hospitals
and clinics $120 per hour and has variable costs of $96.00 per hour
(this includes the payment to the nurse). Total fixed costs equal
$548,640.
Required:
1. Calculate the contribution margin per unit
and the contribution...

Break-Even Units, Contribution Margin Ratio, Margin of
Safety
Khumbu Company's projected profit for the coming year is as
follows:
Total
Per Unit
Sales
$3,331,250
$41.00
Total variable cost
999,375
12.30
Contribution
margin
$ 2,331,875
$ 28.7
Total fixed cost
1,009,369
Operating income
$ 1,322,506
Required:
1. Compute the break-even point in units. If
required, round your answer to nearest whole value.
units
2. How many units must be sold to earn a profit
of $240,000? If required, round your answer...

Break-Even Units, Contribution Margin Ratio, Margin of
Safety
Khumbu Company's projected profit for the coming year is as
follows:
Total
Per Unit
Sales
$2,030,000
$40.00
Total variable cost
568,400
11.20
Contribution margin
$ 1,461,600
$ 28.8
Total fixed cost
539,980
Operating income
$ 921,620
Required:
1. Compute the break-even point in units. If
required, round your answer to nearest whole value.
units
2. How many units must be sold to earn a profit
of $240,000? If required, round your answer...

Break-Even Units, Contribution Margin Ratio, Multiple-Product
Breakeven, Margin of Safety, Degree of Operating Leverage
Jellico Inc.'s projected operating income (based on sales of
450,000 units) for the coming year is as follows:
Total
Sales
$ 11,700,000
Total variable cost
6,669,000
Contribution margin
$ 5,031,000
Total fixed cost
2,871,024
Operating income
$ 2,159,976
Required:
1(a). Compute variable cost per unit. Enter
your answer to the nearest cent.
$per unit
1(b). Compute contribution margin per unit.
Enter your answer to the nearest...

Break-Even Units, Contribution Margin Ratio, Multiple-Product
Breakeven, Margin of Safety, Degree of Operating Leverage
Jellico Inc.'s projected operating income (based on sales of
450,000 units) for the coming year is as follows:
Total
Sales
$11,700,000
Total variable cost
8,190,000
Contribution margin
$3,510,000
Total fixed cost
2,254,200
Operating income
$1,255,800
Required:
1(a). Compute variable cost per unit. Round
your answer to the nearest cent.
$per unit
1(b). Compute contribution margin per unit.
Round your answer to the nearest cent.
$per unit...

CHAPTER 6 HOMEWORK
Exercise 6-18 Break-Even and Target Profit Analysis; Margin of
Safety; CM Ratio [LO6-1, LO6-3, LO6-5, LO6-6, LO6-7]
Menlo Company distributes a single product. The company’s sales
and expenses for last month follow:
Total
Per Unit
Sales
$
318,000
$
20
Variable expenses
222,600
14
Contribution margin
95,400
$
6
Fixed expenses
72,600
Net operating income
$
22,800
Required:
1. What is the monthly break-even point in unit sales and in
dollar sales?
2. Without resorting to computations,...

Break-Even in Units, Target Income, New Unit Variable Cost,
Degree of Operating Leverage, Percent Change in Operating
Income
Reagan, Inc., has developed a chew-proof dog bed—the Tuff-Pup.
Fixed costs are $224,000 per year. The average price for the
Tuff-Pup is $37, and the average variable cost is $23 per unit.
Currently, Reagan produces and sells 20,000 Tuff-Pups annually.
Required:
1. How many Tuff-Pups must be sold to break
even?
units
2. If Reagan wants to earn $79,800 in profit,
how...

PA6-1 Calculating Contribution Margin, Contribution Margin
Ratio, Break-Even Point [LO 6-1, 6-2]
Hermosa, Inc., produces one model of mountain bike. Partial
information for the company follows:
Number of bikes produced and
sold
520
850
950
Total costs
Variable costs
$
129,480
$
?
$
?
Fixed costs per year
?
?
?
Total costs
?
?
?
Cost per unit
Variable cost per unit
?
?
?
Fixed cost per unit
?
?
?
Total cost per unit
?...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 1 minute ago

asked 1 minute ago

asked 1 minute ago

asked 2 minutes ago

asked 2 minutes ago

asked 3 minutes ago

asked 4 minutes ago

asked 4 minutes ago

asked 13 minutes ago

asked 13 minutes ago

asked 14 minutes ago

asked 16 minutes ago