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TIPS Required: (a) Calculate the contribution margin ratio. 1. Find the contribution margin - Per unit sales - per unit variable cost 2. Find the contribution ratio -Per Unit Contribution margin( Answer in part 1)/Per Unit Sales Price (b) Calculate the breakeven point in dollar sales. 1. Fixed cost/contribution margin ( Part (a) 1) (c) Target Income in Units (Fixed Costs + target income)/ contribution margin (d) Target income in sales (Fixed Costs + target income)/ contribution margin ratio Multiple Choice Questions ( 10 points Each ) Select the ONE, BEST Answer 1. A cost that changes in proportion to changes in volume of activity is a(n): A. Differential cost. B. Fixed cost. C. Incremental cost. D. Variable cost. E. Product cost. 2. A target income refers to: A. Income at the break-even point. B. Income from the most recent period. C. Income planned for a future period. D. Income only in a multiproduct environment. E. Income at the minimum contribution margin. 3. The excess of expected sales over the sales level at the break-even point is known as the: A. Sales turnover. B. Profit margin. C. Contribution margin. D. Relevant range. E. Margin of safety. 4. In cost-volume-profit analysis, the unit contribution margin is: A. Sales price per unit less cost of goods sold per unit. B. Sales price per unit less unit fixed cost per unit . C. Sales price per unit less total variable cost per unit . D. Sales price per unit less unit total cost per unit. E. The same as the contribution margin ratio. Problem ( 60 points ) The following information describes a product expected to be produced and sold by Hadley Company: Required: (a) Calculate the contribution margin ratio. (b) Calculate the break-even point in dollar sales. (c) What dollar amount of sales would be necessary to achieve a pretax income of $120,000