Contribution Margin

Harry and Hannah set up a company called Heavenly Tours. They provide tours around the Washington, D.C. area sights and monuments for tourists. Tickets cost $140 Assume that 2,200 customers were served in the month of August. The tax rate is 21%.

Variable costs per customer

Admission fees-$60

Overhead-$25

Hors d'oeuvres-$15

Selling and Administrative-$2

Fixed costs per month

Operations-$50,000

Selling and Administration-$12,500

1. Compute the contribution margin.

2. Compute the contribution margin ratio.

3. Compute the break-even in sales units.

4. Compute the break-even in sales dollars.

5. Compute the margin of safety in units.

6. Prepare a contribution income statement for the month of August.

7. Compute the unit sales required for a monthly after-tax profit of $20,000.