Fixed cost = $75,000
Selling price per package = $1.50
Variable cost per package = $0.75
1.
Contribution margin per package = Selling price per package - Variable cost per package
= 1.50 - 0.75
= $0.75
Contribution margin ratio = Contribution margin per package/Selling price per package
= 0.75/1.50
= 50%
2. Break even point in units = Fixed cost/Contribution margin per package
= 75,000/0.75
= 100,000 units
Break even point in dollar = Fixed cost/Contribution margin ratio
= 75,000/50%
= $150,000
3.
Number of units to be sold to earn a desired profit = (Fixed cost + Desired profit)/Contribution margin per package
= (75,000 + 24,000)/0.75
= 99,000/0.75
= 132,000
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