Requirements

1. Use the contribution margin ratio approach to compute AAA’s breakeven revenue in dollars. If the selling price per unit is $800, how many units must be made to break even?

2. Use the contribution margin ratio approach to compute the dollar revenues needed to earn a monthly target profit of $11,200.

3. Graph AAA’s CVP relationships. Assume that the selling price per unit is $800. Show the breakeven point, the sales revenue line, the fixed cost line, the total cost line, the operating loss area, the operating income area, and the sales in units and dollars when monthly operating income of $11,200 is earned.

4. Suppose that the average revenue AAA earns increases to $2,000 per unit. Compute the new breakeven point in units. How does this affect the breakeven point?

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