Question

Investor Group is opening an office in​ Portland, Oregon. Fixed monthly costs are office rent

​($ 8300​), depreciation on office furniture (1600), utilities (2000),special telephone lines (1600)

a connection with an online brokerage service(2800), and the salary of a financial planner (11700)

Variable costs include payments to the financial planner ​(9​%of​ revenue), advertising (11 %of​ revenue), supplies and postage ​(4​%of​ revenue), and usage fees for the telephone lines and computerized brokerage service (6% of revenue)

Requirement 1. Use the contribution margin ratio approach to compute

Diversified​'s breakeven revenue in dollars. If the average trade leads to $ 800in revenue for Diversified​, how many trades must be made to break​ even?

Begin by showing the formula and then entering the amounts to calculate the required sales dollars for

Diversified to break even.

fixed costs + target profit / CM ratio % =required sales in dollars

PLEASE show work!!

Answer 1

Correct Answer:

Requirement:

Break even in sales dollars		$ 40,000.00
Break even in units		50 UNITS

Working:

A	sales price		$        800.00
	Less: Variable cost
	payments to financial planner	$          72.00
	Advertising	$          88.00
	supplies and postage	$          32.00
	Usage fee	$          48.00
B	Total variable cost		$        240.00
C=A-B	Contribution margin		$        560.00
D =C/A*100	contribution margin ratio		$            0.70
	Fixed cost:
C =A+B	office rent	$    8,300.00
84280.2	Depreciation on office furniture	$    1,600.00
261268.6	utilities	$    2,000.00
193,381.05	special telephones line	$    1,600.00
67,887.54	online brokerage	$    2,800.00
53,879.00	salary of financial planner	$ 11,700.00
E	Total fixed costs		$ 28,000.00
F =E/D	Break even in sales dollars		$ 40,000.00
G=E/C	Break even in units		$          50.00

End of answer.

Thanks.