Calculations contribution margin per passenger =passenger fare $160 - variable cost per passenger $70 $90 Contribution margin per unit is the difference between the selling price per unit and the variable cost per unit. Breaking -even point in units (tickets sold) = Fixed costs $3,150,000 / Contribution margin per unit $90 35,000. Break-even point in dollars = Fixed costs $3,150,000 / Contribution margin ratio .5625 $5,600,000. Contribution margin ratio = unit contribution margin $90/ unit
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$35000 Current Profit: $ 2500 New Price per additional unit: 0 New Contribution Margin = New Price per unit – Variable cost per unit =$8.5-$2.5 =$6 New Sales unit @40% additional sales= 5000*40%= 2000 Additional profit @40% additional Sales = Additional Sales* New Contribution Margin =2000*6 =$12000 New Sales unit @20% additional sales= 5000*20%= 1000 Additional profit @20% additional Sales = Additional Sales* New Contribution Margin =1000*6 =$6000 Steady: Sales: 5000 Price per unit: $10
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000 Contribution Margin = the total sales – the total variable cost = $290,000 Contribution Margin Ratio = Contribution Margin / Total Sales = $290,000 / $720,000 = 0.4028 The break-even point in total sales dollars = Fixed expenses / Contribution Margin Ratio = $282,000 / 0.4028 = $700,099 So the company’s overall break-even in total sales dollars is $700,099. Question 2a: What is the break-even quantity of each product? Break-even quantity = Fixed Expense / Contribution Margin
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expenses $10,500.00 $0.07 Contribution margin $15,000.00 $0.10 Less: fixed expenses $12,000.00 Net income $3,000.00 Special & standard order mix Special order - 25,000 brochures Selling price $10.00 per 100 brochures $0.10 per brochure Selling units 25,000 Variable expenses per unit $0.06 (Less $1 for per 100 brochures for SR) Total Per Unit Revenue $2,500.00 $0.10 Less : Variable expenses $1,500.00 $0.06 Contribution margin $1,000.00 $0.04
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Harvard Business School 9-198-048 Rev. October 14, 1999 Citibank: Performance Evaluation Frits Seegers, President of Citibank California, was meeting with his management team to review the performance evaluation and bonus decisions for the California branch managers. James McGaran's performance evaluation was next. Frits felt uneasy about this one. McGaran was manager of the most important branch in the Los Angeles area, and his financials were impressive. A year ago he would have received
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Salem Telephone Company Case Study Salem Telephone Company Case Study Introduction Salem Data Service, SDS, is a vital asset to Salem Telephone Company. Even though there are losses occurring, SDS has begun to increase performance and losses have been decreasing over the last several months. Background Salem Telephone Company needed computer services to plan, control, and account for operations so it created Salem Data Service, SDC. Because Salem Telephone Company was a regulated utility
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S. Truett Cathy was a successful entrepreneur almost from birth. He started by selling Coca-Cola door to door, then magazines and newspapers, before finally entering the restaurant business. Several successful years later, he began working on a chicken sandwich for his restaurants and customer response was so great that Cathy knew he was on to something special. Cathy initially wanted to license the sales of the product to other restaurants, but saw that it could created quality control issues and
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the offer of 15,000. Customer offer $15,000 Variable costs $13,800 Contribution to profit $1,200 2. The contribution margin approach focuses on the relationship between future costs incurred as a result of taking an order and the revenue the order will produce. The impact of a specific order on profits can be estimated and the lower limits on price can be observed. 3. The major pitfall to the contribution margin approach to pricing is its failure to recognize the fixed costs explicitly
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Case Study II: A. Break-even point in passengers and revenues per month = 35,000; $5,600,000 1) Per Passenger Sales $160 Variable Expenses 70 Unit Contribution Margin $90 Fixed expenses ÷ Unit CM = $3,150,000 ÷ 90 = 35,000 passengers in break-even point 2) Contribution Margin Ratio (CM Ratio) = Contribution Margin ÷ Selling Price = $90 ÷ $160 = .5625 Break-even point in dollars = Fixed costs ÷ CM Ratio = $3,150,000 ÷ .5625 = $5,600,000 B. Break-even point in number
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TO: Pam Berg, Manager of the ALLTEL Pavilion FROM: Valentina Golman, Cost Accountant DATE: October 29, 2011 SUBJECT: ALLTEL’s Strategy and CVP Analysis As requested, CVP analysis of the ALLTEL Pavilion has been investigated. The focus of the investigation was on firm’s competitive strategy, operating results, negotiating contract fees with artists, earning budgeted profit goals. Findings: 1. In response to the competitive strategy of the ALLTEL Pavilion * it is noted to be differentiation
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