Chapter 16, Problem 10E

Schylar Pharmaceuticals, Inc., plans to sell 130,000 units of antibiotic at an average price of $22 each in the coming year. Total variable costs equal $1,086,800. Total fixed costs equal $8,000,000.

(Round all ratios to four significant digits, and round all dollar amounts to the nearest dollar.)

Required:

1. 1. What is the contribution margin per unit? What is the contribution margin ratio?
2. 2. Calculate the sales revenue needed to break even.
3. 3. Calculate the sales revenue needed to achieve a target profit of $245,000.
4. 4. What if the average price per unit increased to $23.50? Recalculate:
5. a. Contribution margin per unit
6. b. Contribution margin ratio (rounded to four decimal places)
7. c. Sales revenue needed to break even
8. d. Sales revenue needed to achieve a target profit of $245,000