Purchase Solution

Contribution Margin Ratio Approach

Not what you're looking for?

Ask Custom Question

1. Gold Eagle Company incurs annual fixed costs of $80,000. Variable costs are $6.00 per unit, and the sales price is $10 per unit. Gold Eagle desires to earn an annual profit of $40,000.
Required: Use the contribution margin ratio approach to determine the sales volume in dollars needed to earn the desired profit.

2. Lee Valley Company produces a product that sells for $80 per unit and has variable costs of $50 per unit. Bristol's annual fixed costs are $240,000, and the company wishes to earn a profit of $60,000.
Required: Use the equation method to determine the sales volume in units and dollars required to earn the desired profit.

Purchase this Solution
Solution Summary

The solution uses the contribution margin ratio approach to determine the sales volume in dollars needed to earn the desired profit and equation method to determine the sales volume in units and dollars required to earn the desired profit.

Solution Preview

Gold Eagle Company

Contribution Margin = Sale Price - Variable Cost = 10 - 6 = $4 per unit

Contribution Margin Ratio = Contribution Margin per unit / Sale price = 4/10 = ...

Purchase this Solution
Free BrainMass Quizzes
Business Ethics Awareness Strategy

This quiz is designed to assess your current ability for determining the characteristics of ethical behavior. It is essential that leaders, managers, and employees are able to distinguish between positive and negative ethical behavior. The quicker you assess a person's ethical tendency, the awareness empowers you to develop a strategy on how to interact with them.

IPOs

This Quiz is compiled of questions that pertain to IPOs (Initial Public Offerings)

Employee Orientation

Test your knowledge of employee orientation with this fun and informative quiz. This quiz is meant for beginner and advanced students as well as professionals already working in the HR field.

Lean your Process

This quiz will help you understand the basic concepts of Lean.

Paradigms and Frameworks of Management Research

This quiz evaluates your understanding of the paradigm-based and epistimological frameworks of research. It is intended for advanced students.

View More Free Quizzes
Related BrainMass Solutions

  • PJM Company: use contribution margin ratio to determine sale

    Use the CONTRIBUTION MARGIN RATIO approach to determine the SALES VOLUME in DOLLARS first and the NUMBER OF UNITS required earning the desired profit.

  • Basics of CVP analysis: Cost Structure

    (use the incremental approach in preparing the answer) INCOME STATEMENT- Incremental Approach TOTAL Incremental Sales 80000 CONTRIBUTION MARGIN 24000 (Contribution Margin Ratio * Incremental Sales) LESS FIXED EXPENSES 16000

  • Solve for Unit Sales

    (Desired Profits +Fixed costs) /Contribution margin ratio (15000+50000)/ (30%) 65000/.3 $216667 = Answer Note Contribution margin ratio= (Sales-variable costs)/sales This Solution contains calculations to aid you in understanding the Solution

  • College Pizza delivers pizzas to the dormitories and apartments

    Using the contribution-margin approach, compute the company's break even point in units (pizzas). 2. What is the contribution-margin ratio? 3. Compute the break-even sales revenue. Use the contribution-margin ration in your calculation. 4.

  • Contribution Format Income Statement & CM Ratio

    Ratio (a) Contribution margin Ratio = Contribution/Sales (b)Statement showing the change in the company's net operating income if it were to increase its total sales by $1,500 Statement of operating income - Contribution approach Change in

  • Determining: ROI, Contribution Margin, & Turnover

    The contribution margin ratio is the contribution margin divided by revenue; this ratio can be computed on either a total amount or a per unit amount. Contribution margin is the difference between revenues and total variable expenses.

  • Multiple choice

    margin = Selling price X contribution margin ratio = 35 X 15% = 5.25 Units to be sold = (150,000+60,000)/5.25 = 40,000 4.

  • A Discussion on Cost Behaviour and Cost-Volume-Profit Analysis

    (3) Percentage of the contribution margin is the same in 2000 and 2001 as sales and cost (Contribution Margin Ratio) is the same.

  • A Revised Income Statement - The Contribution Margin Approach

    266574 A Revised Income Statement - The Contribution Margin Approach The E-Company manufactures trendy, high-quality moderately priced watches that it sells on the Internet.

View More Related Solutions