Significance of the Profit Contribution Percentage, Factors Impacting on the Profit Contribution Percentage.

Assume the following:

Present sales: $400,000 (100,000 units @ $4.00)

Variable cost: $.72 per sales dollar ($2.88 per unit)

Fixed cost: $80,000

a. Find the effect on profit of:

1. A decrease of 25 percent in sales volume.

2. An increase of 25 percent in sales volume.

3. An increase of 50 percent in sales volume.

b. Same as

(a) above except that variable costs equal $.60 per sales dollar.

What is the effect (increase or decrease) of each of the following on the profit contribution percentage and the break-even point.

An increase in sales price of 10 percent?

A decrease in sales price of 10 percent?

An increase of $.14 per unit in variable costs?

A decrease of $.14 per unit in variable costs?

An increase of 5 percent in total fixed costs?

A decrease of 5 percent in total fixed costs?

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