Question

Howard Company sells its product for $40. The variable costs are $24. The fixed costs are...

Howard Company sells its product for $40. The variable costs are $24. The fixed costs are $80,000.

What is the contribution margin?

What is the break even in units?

What is the break even in sales dollars?

What is the break even in units if they want $160,000 in profits?

A. 15000

B. $200,000

C. $24

D. 16

E. 5000

F. 3333

G. 10000

Business   Accounting   
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Homework Answers

Answer #1

1) Contribution margin = Selling price - Variable cost per unit = $40 - $24 = $16

2) Break even in units = Fixed costs / Contribution margin = $80,000 / $16 = 5,000 units

3) Contribution margin ratio = $16 / $40 = 0.40 or 40%

Break even in sales dollars = Fixed costs / Contribution margin ratio = $80,000 / 0.40 = $200,000

4) Break even in units if they want $160,000 in profits = (Fixed costs + Desired profit) / Contribution margin = ($80,000 + $160,000) / $16 = 15,000 units

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