For each of the six independent situations below, compute the missing amounts. a

Question

For each of the six independent situations below, compute the missing amounts. a. Using contribution margin per unit: (Omit the "$" sign in your response) Sales Variable Costs Contribution Margin per Unit Fixed Costs Operating Income Units Sold (1) $ $ 120,000 $ 20 $ $ 25,000 4,000 (2) 180,000 45,000 30,000 5,000 (3) 600,000 30 150,000 90,000 b. Using the contribution margin ratio: (Omit the "$" and "%" signs in your response) Sales Variable Costs Contribution Margin Ratio (%) Fixed Costs Operating Income (1) $ 900,000 $ 720,000 % $ $ 95,000 (2) 600,000 40 % 75,000 (3) 30 % 90,000 60,000

Explanation / Answer

follow thisTarget Sales Volume (in dollars) = Fixed Costs + Target Operating Income 10. Contribution Margin Ratio = $145,000 + $30,000 .35 = $500,000 per month 11. At the break-even point, a company earns a total contribution margin exactly equal to its fixed costs. By dividing the unit contribution margin into this required total contribution margin, we can determine the number of units that must be sold to enable the company to cover its fixed costs. 12. If the contribution margin ratio is 35%, variable costs must account for the other 65% of total revenue. If 65% of total revenue is equal to $26 per unit, the unit sales price must be $26

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