Question

Question Help Highway Driving School charges $800 per student to prepare and administer written and driving tests. Variable costs of $240 per student include trainers' wages, study materials, and gasoline. Annual fixed costs of $151,200 include the training facility and fleet of cars. Read the requirements. Requirement 1. For each of the following independent situations, calculate the contribution margin per unit and the breakeven point in units: Begin by showing the formula for contribution margin per unit and then enter the amounts to calculate the contribution margin per unit for each situation. (Abbreviation used: CM = contribution margin.) CM per unit Situation a. Situation b. Situation c. Situation d.

Answer 1

Situation a Situation b Situation c Situation d Net Sales Revenue per unit - Variable Cost per unit = CM per unit $ 800 - $ 240 = $ 560 $ 400 - $ 240 = $ 160 $ 800 - $ 80 = $ 720 $ 800 - $ 240 = $ 560

Situation a Situation b Situation c Situation d (Fixed Costs + Desired Profit) / CM per unit Required Sales in Units $ 1,51,200 + 0 / $ 560 270 $ 1,51,200 0 / $ 160 $ 1,51,200 + 0 / $ 720 $ 1,23,200 0 / $ 560 945 210 220

The contribution margin decreases when the sales price decreases. The contribution margin increases when the variable cost decreases. The contribution margin does not change when the fixed costs decrease. The breakeven point increases when the sales price decreases. The breakeven point decreases when the variable costs decreases. The breakeven point decreases when fixed costs decrease