Example 1
Sales Price per Unit
Minus: Variable Cost per Unit
Contribution Margin per Unit
Total Fixed Cost
Divided By CM per Unit
Units Needed to Breakeven
Units Needed to Breakeven
Multipled by Price per Unit
Revenue Needed to Breakeven
Total Fixed Cost
Plus:
Desired Profit Befor Tax
Sum of FC and Desired Profit
Divided by CM per Unit
Units Needed for Desired Profit
Profit After Tax
Divided by (1  Tax Rate)
Profit Before Tax
Plus:
Fixed Cost
Sum of FC and Desired Profit
Divided by CM per Unit
Units Needed for Desired Profit
Suppose Flya Kite Company sells kites for $ 15 each.
The
kites have a variable cost per unit of $ 7.
The company has $
80,000 in fixed cost.
(1)
Approximately how many kites would
Flya Kite have to sell to break even? (2) Approximately how
many kites would
the company have to sell to make a before
tax profit of $ 75,000? (3) However, since the tax man cometh
with a tax rate of 35% of before tax profit,
approximately how
many kites would Flya Kite have to sell to make a profit after
tax of $ 75,000?
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View Full DocumentExample 2
First:
Find the Sales Mix Percentage
Total
Units Rented per Year
Divided by Total
Sales Mix Percentage
Second:
Find the Weighted Average Contribution Margin
Tents
RV
Total
Sales Price per Unit
Minus: Variable Cost per Unit
Contribution Margin per Unit
Multipled by Sales Mix %
Weighted Average CM
Third:
Find the Total Units Needed to Breakeven
Total Fixed Cost
Divided By Weighted Average CM
Total Units Needed to Breakeven
Fourth:
Find the Units of Each Product Needed to Breakeven
and the Total Revenue Needed to Breakeven
Tents
RV
Total
Total Units Needed to Breakeven
Multipled by Sales Mix %
Units of Each Product
Multipled by Price per Unit
Revenue Needed to Breakeven
Part B:
Total Units Needed to Make Desired Profit Before Tax
Total Fixed Cost
Plus:
Desired Profit Befor Tax
Sum of FC and Desired Profit
Divided By Weighted Average CM
Total Units Needed for Desired PBT
Units and Revenue for Each Product to make Desired PBT
Tents
RVs
Total
Total Units Needed for Desired PBT
Multiplied by Sales Mix
Units of Each Product
Multiplied by Price per unit
Revenue needed to reach desired PBT
$54,000
$202,500
$256,500
Part C:
Total Units Needed to Make Desired Profit After Tax
Desired Profit After Tax
Divided by (1  Tax Rate)
Profit Before Tax needed
Plus:
Fixed Cost
Sum of FC and Desired Profit
Divided By Weighted Average CM
Total Units Needed for Desired Profit
Units and Revenue for Each Product to make Desired PBT
Tents
RVs
Total
Total Units Needed for Desired PAT
Multiplied by Sales Mix
Units of Each Product
Multiplied by Price per unit
Revenue needed to reach desired PAT
$73,231
$274,615
$347,846
Tent
Spaces
RV
Spaces
Suppose Dual
park rents both tent spaces and RV spaces.
Tent spaces rent
for
$6 and have a variable cost of $3 per night.
RV spaces rent for $15 and
have a variable cost of $7 per night.
Total Fixed Costs are $60,000.
The park
usually rents 6,000 tent spaces and 9,000 RV spaces per year.
(A)
What is the
total
tent rentals and RV rentals and the total revenue needed for the park to
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 Spring '11
 st.john
 total fixed cost, desired profit, Desired PBT Tents, Units Needed

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