Contribution Margin

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