# Contribution Margin

Topics: Revenue, Variable cost, Costs Pages: 4 (553 words) Published: February 1, 2007
1. a.) Contribution per CD unit:

Unit Selling  Variable Costs
\$9.00  1.25 - .35  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  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  4.00 - .50 - .50 = \$15 unit contribution

\$15 / 20 = 75 % contribution margin

b.) Break-even point in units? In dollars?

\$15 (x)  125,000  5,000  10,000  35,000 = 0
11,667 units are needed

11,667 * \$20 = \$233,340 dollars needed

c.) What share of the market is needed to earn a 20% return on investment?

??????????????????

3.

4. a.) Selling to wholesalers at 10% off the selling price

10% * .50 = .05

so it will be sold to wholesalers at \$.45 per can

b.)Contribution per unit

\$.50 - .18 - .06 = \$.26 per unit

c.)Break-even unit volume per unit

\$.26 (x)  300,000  250,000  90,000 = 0 ????

d.)First year break-even share of market

5. Should VCI add the new Model LX4 to its line of VCR's?

The demand would lower for the other models to as follows: Model LX1: 1,800
Model LX2: 700
Model LX3: 200

Total Revenue without new line for year: \$355,000 Total Revenue with...