Homework Answers
1)
Requirement 1:
Contribution margin per unit = Sales price per unit - Variable cost per unit
Situation a:
Contribution margin per unit = Sales price per unit - Variable cost per unit = 680 - 408 = $272
Situation b:
Contribution margin per unit = Sales price per unit - Variable cost per unit = 544 - 408 = $136
Situation c:
Contribution margin per unit = Sales price per unit - Variable cost per unit = 680 - 340 = $340
Situation d:
Contribution margin per unit = Sales price per unit - Variable cost per unit = $272
Requirement 2:
Breakeven point in units = (Fixed Operating costs + Fixed Financing costs) / Contribution per unit
Total Fixed Cost = Fixed Operating costs + Fixed Financing costs
So, Breakeven point in units = Total Fixed Cost / Contribution per unit
(Note: Contribution per unit for every situation is calculated above)
Situation a:
Breakeven point in units = Total Fixed Cost / Contribution per unit = 63,920 / 272 = 235 units
Situation b:
Breakeven point in units = Total Fixed Cost / Contribution per unit = 63,920 / 136 = 470 units
Situation c:
Breakeven point in units = Total Fixed Cost / Contribution per unit = 63,920 / 340 = 188 units
Situation d:
Breakeven point in units = Total Fixed Cost / Contribution per unit = 53,040 / 272 = 195 units
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See circle on the photos below for exercise 2 and 3
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After completing Exercise 3- situation 1, what is the number
of units needed to achieve the desired profit?
See circle on the photos below for exercise 2 and 3
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