Cornerstones of Cost Management 2nd Edition by Don Hansen ,Maryanne Mowen

Exercise 32

Contribution Margin Ratio, Break-Even Sales Revenue, Sales Revenue for Target Profit
Schylar Pharmaceuticals, Inc., plans to sell 130,000 units of antibiotic at an average price of $22 each in the coming year. Total variable costs equal $1,086,800. Total fixed costs equal $8,000,000.
(Round all ratios to four significant digits, and round all dollar amounts to the nearest dollar.)
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 $245,000.
4. What if the average price per unit increased to $23.50? 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 $245,000