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Cornerstones of Cost Accounting 1st Edition by Don Hansen,Maryanne Mowen
Edition 1ISBN: 978-0538736787Cornerstones of Cost Accounting 1st Edition by Don Hansen,Maryanne Mowen
Edition 1ISBN: 978-0538736787 Exercise 6
CONTRIBUTION MARGIN RATIO, BREAK-EVEN SALES REVENUE, SALES REVENUE FOR TARGET PROFIT
Parker Pharmaceuticals, Inc., plans to sell 500,000 units of anti-venom at an average price of $6 each in the coming year. Total variable costs equal $600,000. Total fixed costs equal $8,000,000.
Required:
1. What is the contribution margin per unit? What is the contribution margin ratio?
2. Calculate the sales revenue needed to break even.
3. Calculate the sales revenue needed to achieve a target profit of $650,000.
4. What if the average price per unit increased to $7? Recalculate:
a. Contribution margin per unit
b. Contribution margin ratio (rounded to four decimal places)
c. Sales revenue needed to break even
d. Sales revenue needed to achieve a target profit of $650,000
Parker Pharmaceuticals, Inc., plans to sell 500,000 units of anti-venom at an average price of $6 each in the coming year. Total variable costs equal $600,000. Total fixed costs equal $8,000,000.
Required:
1. What is the contribution margin per unit? What is the contribution margin ratio?
2. Calculate the sales revenue needed to break even.
3. Calculate the sales revenue needed to achieve a target profit of $650,000.
4. What if the average price per unit increased to $7? Recalculate:
a. Contribution margin per unit
b. Contribution margin ratio (rounded to four decimal places)
c. Sales revenue needed to break even
d. Sales revenue needed to achieve a target profit of $650,000
Explanation
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1.
Computation of Contribution margin p...
Cornerstones of Cost Accounting 1st Edition by Don Hansen,Maryanne Mowen
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