Question - Donuts R Us sells expensive donuts. The company's annual fixed costs re $54000. The sales price of a donut is $10, and it costs the company $6 to make each donut.
Ignore income taxes for the following requirements:
1. Using the contribution margin approach, calculate the company's break-even point in units (donuts).
2. Calculate the contribution margin ratio.
3. Calculate the break-even point in sales dollars. Use the contribution margin ratio in your calculation.
4. How many donuts must the company sell to earn a target net profit of $60000? Use the CVP equation.