In the month of March, New Day Spa services 570 clients at an average price of $120.

Question:

In the month of March, New Day Spa services 570 clients at an average price of $120. During the month, fixed costs were $21,000 and variable costs were 65% of sales.

Instructions

(a) Determine the contribution margin in dollars, per unit, and as a ratio.

(b) Using the contribution margin technique, compute the break-even point in dollars and in units.

Contribution Margin
Contribution margin is an important element of cost volume profit analysis that managers carry out to assess the maximum number of units that are required to be at the breakeven point. Contribution margin is the profit before fixed cost and taxes...