EXERCISE 6-3 Computing and Using the CM Ratio

Total sales ( 50, 000 ) $ 200, 000

( - ) Total variable cost expenses ( $ 120, 000 )
Contribution margin $ 80, 000

1) Contribution margin ratio = Contribution margin

Sales

= $ 80,000
$ 200,000

= 40%
EXERCISE 6-4 Charges in Variable Costs, Fixed Cost, Selling Price
and Volume

1. Total Per unit Percent of Sales

Sales ( 2, 000) $ 180, 000 $ 90 100 %
( - ) Variable cost expenses $ 126, 000 $ 63 70 %
Contribution margin $ 54, 000 $ 27 30 %
( - ) Fixed Expenses $ 30, 000
Net operating income $ 24, 000

5000 in month total 9000 in month total Per unit

Sales $ 450, 000 $ 810, 000 $ 90
( - ) Variable cost
expenses $ 315, 000 $ 567, 000 $ 63
Contribution margin $ 135, 000 $ 243, 000 $ 27
( - ) Fixed Expenses $ 30, 000 $ 30, 000
Net operating income $ 105, 000 $ 213, 000

2. Total Per unit

Sales $ 180, 000 $ 90
( - ) Variable cost
expanses $ 130, 000 $ 65
Contribution margin $ 50, 000 $ 25
( - ) Fixed Expanses $ 30, 000
Net operating income $ 20, 000
EXERCISE 6-14 Break-even and Target Profit Analysis

1. Sales = Variable expenses + Fixed expenses + Profit

X = 0.7X + $ 180,000 + $ 0
0.3X = $ 180,000
X = $ 600,000

$ 600,000/$ 40 = $ 15,000

CM Ratio = Unit Contribution margin

Sales

= $ 180,000
$ 600,000

= 30%

2. (a) Break-even point in unit sell

Sales = Variable expenses + Fixed expenses + Profit
$ 40 Q = $ 28 Q + $ 180,000 + $ 0
$ 12 Q = $ 180,000
Q = $ 15,000 unit

Break-even point in total sales dollars

Sales = Variable expenses + Fixed expenses + Profit
X = 0.7X + $ 180,000 + $ 0
0.3X = $ 180,000
X = $ 180,000
0.3
X = $ 600,000

(b) Break-even point in unit sell

Sales = Variable expenses + Fixed expenses + Profit
$ 40 Q = $ 28 Q + $ 180,000 + $ 60,000
$ 12 Q = $ 240,000
Q = $ 20,000 unit

Break-even point in total sales dollars

Sales = Variable expenses + Fixed expenses + Profit
X = 0.7X + $ 180,000 + $ 60,0000
 0.3X = $ 24,000
X = $ 180,000
0.3
X = $ 800,000

(c) Break-even point in unit sell

Sales = Variable expenses + Fixed expenses + Profit
$ 40 Q = $ 24 Q + $ 180,000 + $ 0
$ 16 Q = $ 180,000
Q = $ 11,250 unit

Break-even point in total sales dollars

Sales = Variable expenses + Fixed expenses + Profit
X = 0.6X + $ 180,000 + $ 0
0.4X = $ 180,000
X = $ 180,000
0.4
X = $ 450,000

3. Break-even point in unit sold = Fixed expenses

Unit Contribution margin

= $ 180,000
12

= $ 15,000

Break-even point in total sales dollars = Fixed expenses

CM Ratio

= $ 180,000
30%

= $ 600,000