Break-Even Sales: Sales for Target Profit
Health-Temp Company is a placement agency for temporary nurses. It serves hospitals and clinics throughout the metropolitan area. Health-Temp Company believes it will place temporary nurses for a total of 27,000 hours next year. Health-Temp charges the hospitals and clinics $110 per hour and has variable costs of $95.70 per hour (this includes the payment to the nurse). Total fixed costs equal $377,377.
Required:
1. Calculate the contribution margin per unit and the contribution margin ratio (express the ratio as a decimal rather than a percentage). If required, round your answers to two decimal places.
Contribution margin per unit: $____
Contribution margin ratio: _____
2. Calculate the sales revenue needed to break even.
$_____
3. Calculate the sales revenue needed to achieve a target profit of $88,660.
$________
4. What if Health-Temp had target operating income (profit) of $108,680? Would sales revenue be larger or smaller than the one calculated in Requirement 3?
Larger or Smaller?
By how much?
$______