Question 2: CVP relation version 2 Current sales revenue is $5,000, total variable costs are $3,000, and total fixed costs are $5,000 (no data on units). a) Compute the contribution margin ratio: CMR= b) Write down the CVP relation (version 2): profit as a function of sales revenue. Profit = * Revenue - (e.g., if profit 0.1*Revenue-500, enter 0.1 in the first box and 500 in the second box). c) Predict profit at sales revenue of $10,000: d) Your boss gave you a profit target of $5,000. How much do you need to sell in dollars to meet this target? Compute the breakeven revenue: f) When sales revenue increases by $1,000 (from any initial level in the relevant range), profit increases by: (1-CMR)*$1,000 = $600 CMR*$1,000 = $400 not enough information Question 3: Pricing decisions Total fixed costs are $25,000. Unit variable cost is $30. At current selling price of $75, you sell 1,000 units per month. If you reduce the price by 10%, sale volume will increase to 1,300 units. Compute profit at the original price: Compute profit at the reduced price: Should you reduce the price? YES, because revenue will increase by $12,750 YES, because profit will increase by $3,750 O NO, because a lower price always reduces profit Submit