Holly IncSells a Single Product for $40

question 27

Essay

Holly Inc.sells a single product for $40.Variable costs include $22 for each unit plus a 10% sales commission.Fixed costs are $105,000 per month.
a.What is the contribution margin percentage?
b.What is the breakeven sales revenue?
c.What sales revenue is needed to achieve a $140,000 per month profit?

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Definitions:

Productivity

The measure of the efficiency of production, often quantified as the ratio of outputs produced to inputs used in the production process.

Output Effect

The output effect is the impact on total revenue generated by selling an additional unit of a product or service, assuming the price remains constant.

Production Costs

The total expenses incurred in the process of creating and manufacturing a product.

Substitution Effect

The economic principle that as the price of a good increases, consumers will replace it with cheaper alternatives, whereas if the price decreases, the good will become more preferable.