1. Big Red Motors, Inc., employs 15 sales personnel to market its line of luxury automobiles. The average car sells for $75,000, and a 6 percent commission is paid to the salesperson. Big Red Motors is considering a change to the commission arrangement where the company would pay each salesperson a salary of $1,600 per month plus a commission of 2 percent of the sales made by that salesperson. What is the amount of total monthly car sales at which Big Red Motors would be indifferent as to which plan to select?(CMA adapted) $_______________

2. Break-Even for a Service Firm

Jonah Graham owns and operates The Green Thumb Company (GTC), which provides live plants and flower arrangements to professional offices. Jonah has fixed costs of $3,078 per month for office/greenhouse rent, advertising, and a delivery van. Variable costs for the plants, fertilizer, pots, and other supplies average $27 per job. GTC charges $65 per month for the average job.

Required:

1.How many jobs must GTC average each month to break even? _______________per month

2.What is the operating income for GTC in a month with 79 jobs? Enter a net loss as a negative amount. $_______________

What is the operating income for GTC in a month with 86 jobs? $_______________

3.Jonah faces a tax rate equal to 20 percent. How many jobs must Jonah have per month to earn an after-tax income of $1,260? Round your answer to the nearest whole number of jobs. _______________jobs per month

4.Suppose that Jonah's fixed costs increase to $3,200 per month and he decides to increase the price to $83 per job. What is the new break-even point in number of jobs per month? Round your answer to the nearest whole number of jobs.______________ _jobs per month

Contribution Margin: Unit Amounts

Consider the following information on four independent companies.

		A		B		C		D
Sales		$10,000		$?		$?		$9,000
Less: Variable costs		8,000		11,700		9,750		?
Contribution margin		$2,000		$7,800		$?		$?
Less: Fixed costs		?		4,500		?		900
Operating income		$1,000		$?		$8,000		$2,850
Units sold		?		1,300		300		500
Price/Unit		$4		$?		$?		$?
Variable cost/Unit		$?		$9		$?		$?
Contribution margin/Unit		$?		$6		$?		$?
Contribution margin ratio		?		?		75%		?
Break-even in units		?		?		?		?

Required:

Calculate the correct amount for each question mark. Be sure to round any fractional break-even unitsupto the next whole number. Round variable unit cost and contribution margin per unit to the nearest cent. Round contribution margin ratio to four decimal places. (Express as a decimal-based amount rather than a whole percent.)

A B C D Sales Less: Variable costs $10,000 $9,000 8,000 11,700 9,750 Contribution margin $2,000 $ 7,800 Less: Fixed costs 4,500 900 Operating income $ 1,000 $8,000 $2,850 Units sold 1,300 300 500 Price/Unit $4 Variable cost/Unit Contribution margin/Unit Contribution margin ratio $9 $6 0.7500 Break-Even in units