Answer
3-18(3)
(a) Number of Tickets to Break-Even
Formula = Fixed Costs / Contribution margin per unit
Fixed Costs (given) USD 36,000
Contribution Margin (W-1) USD 16 Per Ticket
Break-even point (36,000 / 16) 2250 Tickets
(b) Number of tickets to earn target profit of USD 12,000 per month
Formula = [(Fixed Costs + Target Profit) / Contribution Margin Per Unit]
[(USD 36,000 + USD 12,000) /USD 16]
3,000 Tickets
Comment on results:
The company would need to sale 2,250 tickets in order to cover all its variable
and fixed costs i.e., achieve break even. This is primarily because sales price
has been decreased to a fixed amount of USD 46 as compared to 10% of the ticket
price in previous two cases. Consequently, high number of tickets should be
sold to earn a contribution margin of 36,000 USD.
Work Step by Step
(W-1) Contribution Margin Per Unit
Sales price USD 46
Less: Variable costs (given) USD 30
Contribution margin( 46 - 30) = USD 16
