Peter is thinking of starting up a Personal Financial Services consultation in his spare time. The basic

Question:

Peter is thinking of starting up a "Personal Financial Services" consultation in his spare time. The basic office equipment will cost $2285 and the variable cost (VC) for each consultation is estimated to be $14.60. He plans to bill each client $65 per consultation.
(a) What is the break-even quantity of consultations for Peter's "Personal Financial Services" operation?
(b) If Peter's profit goal is $1000, how many consultations would he need to reach his goal?
(c) Briefly explain the concept of a "" and demonstrate how the (CM) determined from the information above can be used to determine the same break-even quantity determined in part (i)?
Contribution Margin
Contribution margin is an important element of cost volume profit analysis that managers carry out to assess the maximum number of units that are required to be at the breakeven point. Contribution margin is the profit before fixed cost and taxes...