exercise 5.2:

the contribution margin and the pv ratio

In $

Revenue 420,000

Variable costs

Purchases (205,000)

Freight-in (4,000)

Commissions (3,000)

Total variables costs (212,000)

Contribution margin 208,000

Fixed costs

Salaries (distribution) (60,000)

Travel (3,000)

Advertising (5,000)

Salaries (administration) (38,000)

Depreciation/amortization (40,000)

Leasing (7,000)

Finance costs (14,000)

Total fixed costs (167,000)

Profit before taxes 41,000

(1) Profit before taxes (excluding other income) is $41,000

(2) Contribution margin is $208,000

(3) PV ratio is .495 ($208,000 $420,000)

do in excle