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?

$______