krueger Ltd. wishes to earn a before-tax profit equal to 20% of sales revenue. Its monthly fixed costs are $40,000 and contribution margin ratio is equal to 40%. Required: 1. Determine the annual break-even sales. 2. Compute the sales level required to achieve the desired profit level.
krueger Ltd. wishes to earn a before-tax profit equal to 20% of sales revenue. Its monthly fixed costs are $40,000 and contribution margin ratio is equal to 40%. Required: 1. Determine the annual break-even sales. 2. Compute the sales level required to achieve the desired profit level.
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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 23,500 hours next year. Health-Temp charges the hospitals and clinics $90 per hour and has variable costs of $75.60 per hour (this includes the payment to the nurse). Total fixed costs equal $321,000.
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 $100,000.
$
4. What if Health-Temp had target operating income (profit) of $110,000? Would sales revenue be larger or smaller than the one calculated in Requirement 3?
Larger
Smaller
By how much?
$
