Compute the missing amounts for the following table.

B

C

Sales price per unit

4800

1250

Variable Cost Unit

3360

625

Total Fixed Cost

763,200

687,500

Target Profit

17,280,000

1,562,500

Calculate:

---------------

---------------

Contribution margin per unit

$

$

Contribution margin ratio

%

%

Required units to break even

_______

_______

Required sales dollars to break even

$

$

Required units to achieve target profit

_______

_______

Classifying costs as either variable or fixed is referred to as cost behavior because changes in volume can have an effect on how the costs behave. That is, the total cost either changes (variable costs) or remains constant (fixed costs). The contribution margin is the difference between net sales revenue and variable costs.

Net sales revenue - Variable costs = Contribution margin

It is called contribution margin because it is the amount that contributes to covering the fixed costs and providing operating income. Contribution margin can also be expressed as a unit amount.

Net sales revenue per unit - Variable costs per unit = Unit contribution margin

A third way to express contribution margin is as a ratio. Contribution margin ratio is the ratio of contribution margin to net sales revenue. Because contribution margin is based on sales price and variable costs, which do not change per unit, the ratio can be calculated using either the total amounts or the unit amounts .

Unit contribution margin Net sales revenue per unit = Contribution margin ratio