Problem 1Part - aService Fee per service$6,000Less: Variable Cost per service($1,200)Contribution margin per service$4,800Fixed Cost$800,000Breakeven point in units = Fixed Cost / Contribution Margin per serviceBreakeven point = $800,000 / $4,800Breakeven Point167familiesPart - bService revenue$600,000Less: Variable Cost($120,000)Contribution margin$480,000Less: Fixed Cost($800,000)Net Loss($320,000)Part - cUnits to earn targeted profit of $100,000 = (Fixed Cost + Targeted Profit) / Contribution Margin per serviceUnits to earn targeted profit of $100,000 = ($800,000 + $100,000) / $4,800Units to earn targeted profit of $100,000 =188familiesPart - dService Fee per service$6,000Less: New Variable Cost per service($1,900)Contribution margin per service$4,100New Fixed Cost$800,000Breakeven point in units = Fixed Cost / Contribution Margin per serviceBreakeven point = $800,000 / $4,800Breakeven Point195families

Problem 2Part - aCurrent sale$250,000iVariable Contract$17,5007%iiFixed Contract$60,000Mixed Contract:Variable Contract$10,0004%Fixed Contract$30,000iiiTotal$40,000Variable contract is the best optionPart - bCurrent sale$600,000iVariable Contract$42,0007%iiFixed Contract$60,000Mixed Contract:Variable Contract$24,0004%Fixed Contract$30,000iiiTotal$54,000Variable contract is the best optionPart - cCurrent sale$900,000iVariable Contract$63,0007%iiFixed Contract$60,000Mixed Contract:Variable Contract$36,0004%Fixed Contract$30,000iiiTotal$66,000Fixed contract is the best option

Problem 4Part - aTotal fixed cost$2,400,000Total variable costs$1,500,000Total revenue$4,500,000Contribution Margin$3,000,000

Contribution Margin Ratio66.67%Breakeven sales = Fixed Costs / CM RatioBreakeven sales = $2,400,000 / 66.67%Breakeven sales$3,600,000Level of volume reduction$900,000Part - bCommitted fixed cost is the cost that can't be avoided like depreciation expense for the assets and discretionary fixed cost is the cost that can be avoided like the rent of the business premises.This is important in making decision as it will help the management to determine the actual fixed cost that will eventually require to determine the breakeven point.

Problem 7Liquidity:Current Ratio4.70Current Assets Current Liabilities$940,000 $200,000Solvency:Debt to Total Assets Ratio0.42Total Liabilities Total Assets$1,000,000 $2,375,000Activity:Accounts Receivable Turnover Ratio5.27Sales ((AR 20X2 + AR 20X3)/2)$1,685,000 ($350,000+$290,000)/2Profitability:Net Profit on Sales9.50%Net Income Revenue$160,000 $1,685,000Operating:Book Value Per Share6.88Total Stockholder's equity Shares outstanding$1,375,000 ($100,000/$0.50)