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Question 6: The following company provides a single product and have provided their summary forecast data...

Question 6: The following company provides a single product and have provided their summary forecast data shown below relating to its product for 2020.        

                                                                                                                                   

Selling price per unit

$55

Variable manufacturing costs

$23

Annual fixed manufacturing costs

$450000

Variable, marketing, distribution and administration costs

$9

Annual fixed non-manufacturing costs

$229000

Annual volume

50000

a. Calculate the contribution margin per unit.                                         

b. Calculate the contribution margin ratio.

c. Calculate the break-even in units and sales dollars for 2020.

d.Calculate the profit earned in 2020.

Business   Accounting   
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Homework Answers

Answer #1

Contribution Margin per unit = Sales price - Variable costs

= 55 - (23+9)

= 23

Contribution margin ratio = Contribution margin per unit/Sales price

= 23/55

= 41.82%

Breakeven units = Fixed cost/Contribution margin per unit

= (450,000+229,000)/23

= 29,522 units (rounded)

Breakeven dollars = Fixed cost/Contribution margin ratio

= (450,000+229,000)/41.82%

= 1,623,625 (rounded)

Profit earned = (Sales * Contribution margin per unit) - Fixed costs

= (50,000*23) - (450,000+229,000)

= 471,000
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