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
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