Thompson is interested in entering the after-school tutoring business. He estimates that his fixed costs will be $18,000 per year and his variable costs will be 25% of sales. His tutoring price is $15 per hour.

a. What is the contribution margin per unit? What is his breakeven point (BEP) in hours and sales dollars?

b. What is his BEP in hours?

c. What is his BEP in sales dollars?

d. Which types of costs would you have included in the fixed cost and variable cost categories if you were Thompson entering the tutoring business?

e. What other internal and external information is relevant in deciding whether to pursue the tutoring business?