Question

In the month of March, Style Salon services 630 clients at an average price of $120. During the month, fixed costs were $26,280 and variable costs were 50% of sales

Determine the contribution margin in dollars, per unit, and as a ratio.

Contribution Margin Contribution Margin per unit contribution margin ratio Break even sales Break even sales in unit

Answer 1

Contribution margin per unit:
Service revenue per client				120
Less: Variable cost @50% of selling price				60
Contribution margin per unit:				60
Contribution margin ratio:
Contrbution margin per unit				60
Divide: Selling price per unit				120
Contribution margin ratio:				50%
Total Contribution margin:
Contribution margin per unit				60
Multiply: Number of clients served				630
Total Contribution margin:				37800
Break even units:
Fixed cost				26,280
Divide: Contribution margin per unit				60
Break even units:				438
Break even sales in $
Fixed cost				26,280
Divide: CM ratio				50%
Break even sales in $				52560