Answer -
Selling price = $40 per unit
CM ratio = 30%
Contribution margin per unit = 40 x 30%
= $12
1)
Since CM ratio is 30%, hence variable cost is 70% of sales
Variable expense per unit = 40 x 70%
= $28
2)
A) Let the number of units to be sold to break even = Y
Sales = Variable expenses + Fixed expenses
40Y = 28Y + 180,000
12Y = 180,000
Y = 15,000
Hence, number of units to be sold to break even = 15,000
B) Break even sales (in $) = 15,000 x 40
= $600,000
3)
A) Let the number of units to be sold to earn a profit of $60,000 = Y
Sales = Variable expenses + Fixed expenses + Profit
40Y = 28Y + 180,000 + 60,000
12Y = 240,000
Y = 20,000
Hence, number of units to be sold to earn a profit of $60,000 = 20,000
B) Sales (in $) to earn a profit of $60,000 = 20,000 x 40
= $800,000
4)
A) Let the number of units to be sold to break even = Y
Sales = Variable expenses + Fixed expenses
40Y = 24Y + 180,000
16Y = 180,000
Y = 11,250 units
Hence, number of units to be sold to break even = 11,250 units
B) Break even sales (in $) = 11,250 x 40
= $450,000
C) Dollar sales needed to attain target profit
Required sales = (FIxed cost+Desired profit)/Contribution margin
= (180000+60000)/0.40
Required sales = $600000
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