Contribution Margin, Product Margin and Breakeven. Dixon Pharmaceuticals, a drug manufacturing company, produces prescription medication for the treatment of respiratory infections. The company’s leading product line is Cycladine. The wholesale price per tablet of Cycladine is $0.85. The variable cost associated with the production of 1,000 tablets of Cycladine is $250.

Other costs associated with the production include annual laboratory equipment rental of $100,000, annual salaries of employees who work in the Cycladine division of $180,000, and other miscellaneous fixed costs for the Cycladine division of

$45,000 per year. The 45,000 square foot Cycladine division is located in a 136,364 square foot facility with several other product lines of Dixon Pharmaceuticals.

Overhead totals $500,000 for the company and is allocated on the basis of the percent of the total square footage a division uses. Dixon Pharmaceuticals expects to sell 1,000,000 tablets of Cycladine in the upcoming year.

a. Determine the total contribution margin, total product margin, and net income for the Cycladine division of Dixon Pharmaceuticals.

b. Determine the net income breakeven point in tablets of Cycladine.

c. Determine the breakeven point for Dixon Pharmaceuticals to cover just its direct costs.