Cameron Company is a placement agency for temporary nurses. It serves hospitals and clinics throughout the metropolitan area. Cameron Company believes it will place temporary nurses for a total of 25,000 hours next year. Cameron charges the hospitals and clinics $75 per hour and has variable costs of $60 per hour (this includes the payment to the nurse). Total fixed costs equal $321,000.

Required:

1. Calculate the contribution margin per unit and the contribution margin ratio.

2. Calculate the sales revenue needed to break even.

3. Calculate the sales revenue needed to achieve a target profit of $100,000.

4. What if Cameron had target operating income (profit) of $90,000? Would sales revenue be larger or smaller than the one calculated in Requirement 3. Why? By how much?

LO1