Problem
1. Compute the contribution margin ratio for the mailboxes.
2. How much revenue must Fitzgibbons earn in order to break even?
3. What volume of sales must be earned if Fitzgibbons wants to earn an after-tax income equal to 8 percent of sales? Assume that the tax rate is 34 percent.
4. What is the effect on the contribution margin ratio if the unit selling price and unit variable cost each increase by 10 percent?
5. Suppose that management has decided to give a 3 percent commission on all sales. The projected income statement does not reflect this commission. Recom- pute the contribution margin ratio assuming that the commission will be paid. What effect does this have on the break-even point?