Question

Schylar Pharmaceuticals, Inc., plans to sell 120,000 units of antibiotic at an average price of $18 each in the coming year. Total variable costs equal $820,800. Total fixed costs equal $7,400,000.

Required:

1. What is the contribution margin per unit? Round your answer to the nearest cent.
$

What is the contribution margin ratio? Round your answer to two decimal places. (Express as a decimal-based answer rather than a whole percent amount.)

2. Calculate the sales revenue needed to break even. Round your answer to the nearest dollar.
$

3. Calculate the sales revenue needed to achieve a target profit of $215,000. Round your answer to the nearest dollar.
$

4. What if the average price per unit increased to $19.50? Recalculate the following:

a. Contribution margin per unit. Round your answer to the nearest cent.
$

b. Contribution margin ratio. Enter your answer as a decimal value (not a percentage), rounded to four decimal places.

c. Sales revenue needed to break even. In your computations, use your rounded answer from part (4-b) above for the contribution margin ratio, and round your final answer to the nearest dollar.
$

d. Sales revenue needed to achieve a target profit of $215,000. In your computations, use your rounded answer from part (4-b) above for the contribution margin ratio, and round your final answer to the nearest dollar.
$

Answer 1

1)

SALES = 18*120,000 = 2,160,000

VARIABLE COST = 820800

CONTRIBUTION = 1,339,200

CONTRIBUTION PER UNIT = 11.16

CONTRIBUTION RATIO = 1339200 / 2160000 = 0.62

0.62 * 100 = 62%

ANSWER 2

break even point = fixed cost / contribution margin per unit

7,400,000 / 11.16= 663082.4 unit

break even point revenue :

663082.4 * 18 =$ 11,935,484

answer 3

TARGET PROFIT BEP = (FIXED COST + TARGET PROFIT) / CONTRIBUTION

= (7,400,000 + 215,000 ) / 11.16

=682347.67 UNIT IT IS THE TARGET PROFIT BEP

REVENUE = 682347.67 * 18 = $12,282,258

ANSWER 4

A)

CONTRIBUTION = SALES - VARIABLE COST

INCREASE SELLING PRICE = 19.50

CONTRIBUTION

120,000 UNIT PRODUCTION

19.5 SELLING PRICE

VARIABLE COST = 820800

CONTRIBUTION =2340000 - 820800

= 1519200 IT IS THE CONTRIBUTION

B)

CONTRIBUTION MARGIN RATIO =CONTRIBUTION / TOTAL REVENUE * 100

(1519200 / 2340000 ) * 100 = 64.92%

ROUND ANSWER = 65%

C)

Break even point = fixed cost / contribution

7,400,000 / 12.66 (1519200 / 120000 )

BEP= 584518.16

REVENUE = 11398104     (584518.16 * 19.5)