Chapter 20, Problem 32E

Mi Tierra Driving School charges $680 per student to prepare and administer written and driving tests. Variable costs of $408 per student include trainers’ wages, study materials, and gasoline. Annual fixed costs of $63,920 include the training facility and fleet of cars.

Requirements

1. 1. For each of the following independent situations, calculate the contribution margin per unit and the breakeven point in units by first referring to the original data provided:
   1. a. Breakeven point with no change in information.
   2. b. Decrease sales price to $544 per student.
   3. c. Decrease variable costs to $340 per student.
   4. d. Decrease fixed costs to $53,040.
2. 2. Compare the impact of changes in the sales price, variable costs, and fixed costs on the contribution margin per unit and the breakeven point in units.