Contribution Margin
1. a.) Contribution per CD unit:
Unit Selling Β Variable Costs
$9.00 Β 1.25 - .35 Β 1.00 = $6.40
$6.40
b.) Break-even volume in CD units and dollars:
($275,000 + 250,000) / 6.40 = 82,032 units
82,032 * $9.00 = $738,288 to break even
c.) Net profit if 1 million CD's sold:
1,000,000 * 6.40 = 6,400,000
6,400,000 Β 525,000 = $5,875,000
d.) Necessary CD unit volume to achieve $200,000 profit
6.40 (x) - $525,000 = 200,000
x = 113,282 units needed
2. a.) Unit contribution and contribution margin:
$20 Β 4.00 - .50 - .50 = $15 unit contribution
$15 / 20 = 75 % contribution margin
b.) Break-even point in units? In dollars?
$15 (x) Β 125,000 Β 5,000 Β 10,000 Β 35,000 = 0......
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