Cornerstone Exercise 16.3 (Algorithmic) Break-Even Sales: Sales for Target Profit

Health-Temp Company is a placement agency for temporary nurses. It serves hospitals and clinics throughout the metropolitan area. Health-Temp Company believes it will place temporary nurses for a total of 20,000 hours next year. Health-Temp charges the hospitals and clinics $80 per hour and has variable costs of $64.80 per hour (this includes the payment to the nurse). Total fixed costs equal $294,576.

Required:

1. Calculate the contribution margin per unit and the contribution margin ratio (express the ratio as a decimal rather than a percentage). If required, round your answers to two decimal places.

Contribution margin per unit	$
Contribution margin ratio

2. Calculate the sales revenue needed to break even. $

3. Calculate the sales revenue needed to achieve a target profit of $94,240. $

4. What if Health-Temp had target operating income (profit) of $115,520? Would sales revenue be larger or smaller than the one calculated in Requirement 3?

By how much? $