Show your work to get any partial credit. Give me the formula that you might use or show other thought process. If you just give me an answer and it’s not the right one, you will get zero points for that question.

Other formulas needed outside of the reading material:

Calculate Contribution Margin (CM) Ratio Per Unit (3 points)

Calculate Total Contribution Margin (CM) Dollars (5 points)

Problem 2:

Sales = $5,000,000

CM Ratio = 0.40

Fixed cost = $1,600,000

Calculate Profit.

Problem 3:

A company has budgeted sales of $200,000, a profit of $60,000 and fixed expenses of $40,000.

Calculate contribution margin ratio.

Review Problem : Break-even point

Problem 4:

Voltar Company manufactures and sells a telephone answering machine. The company’s contribution format income statement for the most recent year is given below:

Total

Per unit

Pct. of sales (Ratios)

Sales

$1,200,000

$60

100%

Less variable expenses

900,000

45

?%

——–

——–

——–

Contribution margin

300,000

15

?%

Less fixed expenses

240,000

======

======

——–

Net operating income

$60,000

======

What is the Contribution Margin (CM) Ratio (or percent of sales)? (5 points)

Calculate break-even point both in total units and total sales dollars. (10 points)

Problem 5:

Management is anxious to improve the company’s profit performance. Assume that next year management wants the company to earn a minimum profit of $90,000.

How many units will have to be sold to meet the target profit figure?

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