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Dillon Inc. Contribution margins and target profits

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In 2006, Dillon Inc. had a total contribution margin of $100,000 and net income of $60,000. For the upcoming year, the company would like to earn a target profit of $80,000. Assuming sales volume is expected to be the same in the upcoming year as it was in the past year, give three separate options the company could implement in order to achieve their target profit in the upcoming year.

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Solution Summary

You have three potential options (see attached). If you know the sales price per unit or the variable cost per unit, you can calculate EXACTLY the amount of the shift in each three. Currently, I can only give the general strategy (such as raising prices) but can't tell you how much to raise them without this data.

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You have three potential options (see attached). If you know the sales price ...

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Carol Sargent, PhD
Education
  • BSc, University of Virginia
  • MSc, University of Virginia
  • PhD, Georgia State University
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