EXERCISE 6-17 (30 MINUTES)

3. The level of activity required to earn a profit of $200,000 can be computed as follows:

Activity to

Total Fixed Cost (a)

Contribution (b)

Attain Tar-

Within

Relevant

get Profit

Annual

(a) ÷ (b)

Range?

Margin

+ Target Profit

Profit

Cost Target

Patient-Days Total Fixed