EXERCISE 6-17 (30 MINUTES)

1. The contribution margin per sweatshirt would be:

Selling price... $13.50

Less variable expenses:

Purchase cost of the sweatshirts ... $8.00

Commission to the student salespersons .... 1.50 9.50

Contribution margin ... $ 4.00

Since there are no fixed costs, the number of unit sales needed to yield

the desired $1,200 in profits can be obtained by dividing the target

$1,200 profit by the unit contribution margin:

Target profit $1,200

= =300 sweatshirts

Unit contribution margin $4.00 per sweatshirt

300 sweatshirts × $13.50 per sweatshirt = $4,050 in total sales.