Exercise 1

A company sells small motors as a component part to automobiles. The Model 101 motor sells for $850 and has per-unit variable costs of $400 associated with its production. The company has fixed expenses of $90,000 per month. In August, the company sold 425 of the Model 101 motors.

1. Calculate the contribution margin per unit for the Model 101.
2. Calculate the contribution margin ratio of the Model 101.

Exercise 2

James Motors sells a single product with a selling price of $400 with variable costs per unit of $160. The company's monthly fixed expenses are $36,000.

1. What is the company's break-even point in units?
2. What is the company's break-even point in dollars?
3. How many units will James need to sell in order to realize a target profit of $48,000?
4. What dollar sales will James need to generate in order to realize a target profit of $48,000?