Calculate break-even and target-profit volume using contribution margin.
Price is $75 per kit. Variable cost is $39 per kit. Fixed launch cost is $96,000. Forecast volume is 2,400 kits. Use contribution margin first, then divide fixed cost or fixed cost plus target profit by that contribution. Do not use gross margin or full allocated cost in the break-even formula; CVP needs variable cost and fixed cost separated. Step 1 Contribution margin per kit = $75 - $39 = $36. This is the amount each kit contributes toward fixed launch cost and profit. Step 2 Break-even units = $96,000 / $36 = 2,667 kits. The forecast of 2,400 kits…
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