Question

# 1. Wang Co. manufactures and sells a single product that sells for \$540 per unit; variable...

1.

Wang Co. manufactures and sells a single product that sells for \$540 per unit; variable costs are \$324 per unit. Annual fixed costs are \$836,000. Current sales volume is \$4,290,000. Compute the contribution margin per unit.

2.

A firm expects to sell 24,800 units of its product at \$10.80 per unit and to incur variable costs per unit of \$5.80. Total fixed costs are \$68,000. The total contribution margin is:

3.

McCoy Brothers manufactures and sells two products, A and Z in the ratio of 5:2. Product A sells for \$86; Z sells for \$124. Variable costs for product A are \$45; for Z \$49. Fixed costs are \$518,300. Compute the number of units of Product A McCoy must sell to break even.

4.

A company has fixed costs of \$98,800. Its contribution margin ratio is 38% and the product sells for \$59 per unit. What is the company's break-even point in dollar sales?

1. Contribution margin per units

 Amount Sales per units \$540 - Variable per units \$324 = contribution margin per units = \$216

2. Total contribution margin

 Amount Sales 24,800 units *\$10.80 \$267,840 - Variable 24,800 *\$5.80 \$143,840 = contribution margin = \$124,000

3. Break-even per units

 A Z Total Sales per units \$86 \$124 - Variable per units \$45 \$49 = contribution per units \$41 \$75 sales mix *5 *2 7 = Average Contribution Margin \$205 \$150 \$355

Average Contribution Margin = \$355 / 7 = \$50.71

Break-even per units = Fixed cost / average contribution margin

= \$518,300 / \$50.71 = 10,220.86 units

4. Break-even points in dollar sales

break-even point in dollar sales = Fixed cost / contribution ratio

= \$98,800 / 38% = \$260,000

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