Question

Health-Temp Company is a placement agency for temporary nurses. It serveshospitals and clinics throughout the metropolitan area. Health-Temp Companybelieves it will place temporary nurses for a total of 23,500 hours next year.Health-Temp charges the hospitals and clinics $90 per hour and has variablecosts of $75.60 per hour (this includes the payment to the nurse). Total fixedcosts equal $321,000.

. Calculate the contribution margin per unit and the contribution margin ratio.2. Calculate the sales revenue needed to break even.3. Calculate the sales revenue needed to achieve a target profit of $100,000.4. What if Health-Temp had target operating income (profit) of $110,000? Wouldsales revenue be larger or smaller than the one calculated in Requirement 3?Why? By how much?

Answer 1

1. Contuibution margin pee unit Variable cost per unit - Selling Price peecanit - = $90 - $75.60 & $14.40 per unit * contuibution margin valio unit contribution margin unit selling price $14.40 16% $90 RO Sales revenue needed to Dueak even Bueak even points Pixed cast Contribution per unit = $320,000 $ 14-40 92.991-67 units .: sales revenue needed to break even 22,29164x $90 $ 2006256 $ 2,006,250 3 Sales revenue needed to achieve target puolet of $100 Fixed cost & target puotes contribution per un = 29, 236 II units 321,000+ $100.000. $14.40 - Revence Requied - 29, 236.11 X $90 - $2,631,250

4 Pauger operating income of $110.000 - $321,000+ $110.000 $14.40 29,930.55 units $ 431.000 = $14.40 - Revenue Requied: $2,693,750 Sales revenue would be larger than the one calauated in requirement 3. Because you each increase in Puotid is by chaeasing conturbation there. Hemately to devenue. ut increases by $2,693,750 $2,631,250 = $62,500 if dequied $62,500 increased revenue to achieve teuget profit-