Answer
3-18(4)
(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 24 Per Ticket
Break-even point (36,000 / 24) 1500 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 24]
2,000 Tickets
Comment on results:
Delivery fee of USD 8 per ticket increases the contribution margin and
therefore, both the number of tickets to achieve break even and to earn
net income of USD 12,000 would be reduced as calculated above.
Hence, greater the contribution margin per unit, lesser the number
of units to be sold to recover costs and earn profits.
Work Step by Step
(W-1) Contribution Margin Per Unit
Sales price USD 46
Add: Delivery Fee USD 8
Less: Variable costs (given) USD 30
Contribution margin( 46 + 8 - 30) = USD 24
