Scenario 1
The following information has been extracted from the financial statements of Vivid, a social media company. Revenue is generated through advertising on the social media platform, where the number of ‘clicks’ is the driver of revenue.

Required
(a) Calculate the contribution margin per click.
(b) Calculate the number of clicks required to break-even.
(c) How might the management of Vivid reduce the number of clicks required to break even?

Scenario 2
Some changes have occurred: revenue pricing; fixed cost/variable cost structures; and levels of some fixed costs triggered by changes to the accommodation/office space.

Required
(d) Calculate the contribution margin per click.
(e) Calculate the number of clicks required to break even.
(f) What has happened to the break-even point? Why?

Transcribed Image Text:

Item Cost of sales Revenue Sales and marketing General and administration expenses Occupancy and rental expenses Depreciation and amortisation. Interest and finance costs $ 200 000 669 900 340 000 21000 13 000 50 000 54 500 Additional information 60% variable Based on 304 500 clicks at $2.20 per click 60% variable; 40% fixed Fixed Fixed Fixed Fixed