Nator group is establishing a factory in new south wale, australia.

Fixed monthly expenses are factory rent ($9,004),

depreciation on factory machine ($2,004), utilities ($1,704), telephone bills ($1,504), a connection with an online service
($3,004), and the salary of a worker ($5,504). variable costs include payments to the marketer planning (11% of
revenue), administration expense (10% of revenue), supplies (5% of revenue), and usage fees for the telephone lines and
water bill at office(10% of revenue). requirements

Questions:

1. apply the contribution margin ratio approach to calculate nator group breakeven revenue in dollars. if the average
service leads to $1,500 in revenue per service for nator group, how many service must be made to break even? (0.5
point)

2. apply the equation approach to calculate the dollar revenues needed to earn a monthly target profit of $13,400. (0.25
point)

3. suppose that the average revenue nator earns increases to $1,600 per service. compute the new breakeven point in
service. how does this affect the breakeven point? (0.25 point)

ANSWERS:

I got this through dividing the contrib margin

1.) Sales (100%) 35,506.25 by 64% to get 100% (22,724/0.64)
less: Variable costs (36% of -
sales) 12,782.25 36% x 35,506.25

ContribMar (64% of sales) 22,724.00

-
less: Fixed cost (22,724) 22,724.00

Operating Income - This must be ZERO, for breakeven

Total Sales 35,506.25

divided by price per service 1,500.00

Total number of service
needed for breakeven 23.67

2.) x-VC-FC=13,400 to check: Sales (100%) 56,443.75

less: Variable costs (36% of -
x = total sales sales) 20,319.75

VC = 0.36x ContribMar (64% of sales) 36,124.00

-
FC = 22,724 less: Fixed cost (22,724) 22,724.00

Operating Income 13,400.00

Equation
 x-0.36x-22,724 = 13,400
0.64X=13,400+22,724
0.64x=36124
x=36124/0.64
x= 56,443.75 This is the revenue required to get 13,400 monthly

3.)
Revenue and units required for breakeven point has an indirect relationship, the higher the
revenue, the lower units it will need to breakeven. Thus, if they will add 1,600 for every
service they render, they will breakeven at a lower unit.

BEP in service computation

Sales (100%) 37,106.25 Old sales + 1600

less: Variable costs (36% of -
sales) 13,358.25

ContribMar (64% of sales) 23,748.00

-
less: Fixed cost (22,724) 22,724.00

Operating Income 1,024.00

Total Sales 37,106.25

divided by price per service 3,100.00 1500+1600

New BEP 11.97

BEP in service computation

Sales (100%) 38,706.25 Total Sales 38,706.25

less: Variable costs (36% of -
sales) 13,934.25 divided by price per service 4,700.00

ContribMar (64% of sales) 24,772.00 New BEP 8.24

-
less: Fixed cost (22,724) 22,724.00

Operating Income 2,048.00