Exercise 16.10 (Algorithmic) Contribution Margin Ratio, Break-Even Sales Revenue, Sales Revenue for Target Profit

Schylar Pharmaceuticals, Inc., plans to sell 115,000 units of antibiotic at an average price of $25 each in the coming year. Total variable costs equal $1,035,000. Total fixed costs equal $7,700,000.

Required:

1. What is the contribution margin per unit? Round your answer to the nearest cent. $

What is the contribution margin ratio? Round your answer to two decimal places. (Express as a decimal-based answer rather than a whole percent amount.)

2. Calculate the sales revenue needed to break even. Round your answer to the nearest dollar. $

3. Calculate the sales revenue needed to achieve a target profit of $205,000. Round your answer to the nearest dollar. $

4. What if the average price per unit increased to $26.50? Recalculate the following:

a. Contribution margin per unit. Round your answer to the nearest cent. $

b. Contribution margin ratio. Enter your answer as a decimal value (not a percentage), rounded to four decimal places.

c. Sales revenue needed to break even. In your computations, use your rounded answer from part (4-b) above for the contribution margin ratio, and round your final answer to the nearest dollar. $

d. Sales revenue needed to achieve a target profit of $205,000. In your computations, use your rounded answer from part (4-b) above for the contribution margin ratio, and round your final answer to the nearest dollar. $