Suppose that the price is $25, unit variable cost is $15/unit, and total fixed costs are $4,900.

Question:

Suppose that the price is $25, unit variable cost is $15/unit, and total fixed costs are $4,900. Required:

a) Compute the unit contribution margin and contribution margin ratio:unit CM=___________________CM ratio= ____________________ (enter CMR as a fraction of 1, not as %)

b) Write down the CVP relation (version 2): profit as a function of sales revenue.(fill in the missing numbers in an equation like Profit = 0.35 * Revenue - 50).Profit = _____________ * Revenue - _______________

c) Based on the CVP relation in (b), what is the breakeven revenue?

d) Based on the CVP relation in (b), what is the sales revenue required to achieve target profit of $5,000?

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...