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Calculate the breakeven point and contribution margin. Breakeven point Fixed cost Contribution margin Selling price per...

Calculate the breakeven point and contribution margin.

Breakeven point Fixed cost Contribution margin Selling price per unit Variable cost per unit
units $88,400 $ $9 $5
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Answer #1

Solution :

The formula for calculating contribution margin is

= Selling price per unit – Variable cost per unit         

As per the information given in the question we have

Selling price per unit = $ 9    ;      Variable cost per unit = $ 5

Thus the contribution margin = $ 9 - $ 5 = $ 4             

The formula for calculating Breakeven Point is

= Fixed cost / Contribution margin

As per the information given in the question we have

Fixed Cost = $ 88,400   ; Contribution margin = $ 4

Therefore the Breakeven point = $ 88,400 / $ 4 = 22100

The Contribution margin = $ 4

The Breakeven point in units = 22,100 units

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