Holly Inc. sells a single product for $40. Variable costs include $22 for each unit plus a 10% sales commission. Fixed costs are $105,000 per month.a. What is the contribution margin percentage?b. What is the breakeven sales revenue?c. What sales revenue is needed to achieve a $140,000 per month profit?
What will be an ideal response?
a. 35% = ($40 - $22 - 10% × $40)/$40.00
b. $300,000 = $105,000/35%
c. $700,000 = ($105,000 + $140,000)/35%
Contribution margin percentage = Unit contribution margin/Selling price. Break-even sales = Fixed costs/Contribution margin percentage. Target sales = (Fixed costs + Target Profit)/Contribution margin percentage.
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