Problem - 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 $22each in the coming year. Total variable costs equal $1,086,800. Total fixed costs equal $8,000,000.
Required:
1. What is the contribution margin per unit? Round your answer to the nearest cent.
What is the contribution margin ratio? Round your answer to two decimal places. (Express as a decimal-based answer rather than a whole percent amount.)
2. Calculate the sales revenue needed to break even. Round your answer to the nearest dollar.
3. Calculate the sales revenue needed to achieve a target profit of $245,000. Round your answer to the nearest dollar.
4. What if the average price per unit increased to $23.50? Recalculate the following:
a. Contribution margin per unit. Round your answer to the nearest cent.
b. Contribution margin ratio. Enter your answer as a decimal value (not a percentage), rounded to four decimal places.
c. Sales revenue needed to break even. In your computations, use your rounded answer from part (4-b) above for the contribution margin ratio, and round your final answer to the nearest dollar.
d. Sales revenue needed to achieve a target profit of $245,000. In your computations, use your rounded answer from part (4-b) above for the contribution margin ratio, and round your final answer to the nearest dollar.