Betterbuy Electronics Store, contribution margin, sales revenue
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I really need help with this problem:
Preston Parkas company's sales revenue is $30 per unit , variable costs are $19.50 per unit, and fixed costs are $147,000.
a. What is Preston's contribution margin per unit?
b. Determine the number of units Preston must sell to break even
c. Detemine the sale revenue required to earn (pretax) income equal 10 20% of revenue.
d. Preston is considering increasing its advertising expense by $28,500. How much of an increase in sales unts is necessary from expanded advertising to justify this expenditure?
See attached file.
2-28
(a) Price - Variable = Cost Contribution margin per unit
(b) Let X = the number of units sold to break even
Sales revenue - Costs = Income
(Price * Quantity) - Variable costs - Fixed costs = Income
(c) Let X = the number of units sold to generate revenue necessary to earn pretax income of 20% of revenue
Sales revenue - Costs = Income
(Price * Quantity) - Variable costs - Fixed costs = Income
Price * required units = Desired revenue
(d) Let Y = necessary increase in sales units
Incremental sales revenue - Incremental variable costs - Incremental fixed costs = $0
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Solution Summary
The solution explains the calculations relating to breakeven analysis
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a. What is Preston's contribution margin per unit?
Price - Variable Cost = Contribution margin per unit
Price = $30 and variable cost = $19.50
Contribution Margin per unit = 30-19.50 = $10.50
b. Determine the number of units Preston must sell to break even
Let X = the number of units sold to break even
Sales revenue - Costs = Income
At breakeven, total revenue = total cost and ...
Purchase this Solution
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