Question

To pay for his academic​ fees, Tarek, a college​ student, is selling a computer accessory to other students. His cost to purchase each piece is ​$ 65 65​, and he is planning to sell the accessories for $ 104 $104 each. Fixed costs for advertising amount to ​$ 550 550. ​(a)  Compute the contribution margin. ​(b)  Compute the contribution rate. ​(c)  Compute the​ break-even point in units. ​(d)  Compute the​ break-even point in sales dollars. ​(a) The contribution margin per unit is ​$ nothing . ​(Type a whole​ number.) ​(b) The contribution rate is nothing ​%. ​(Round to two decimal places as​ needed.) ​(c) The​ break-even point in units is nothing . ​(Round up to the nearest​ unit.)   ​(d) The​ break-even point in sales dollars is ​$ nothing . ​(Round to the nearest cent as​ needed.) Enter your answer in each of the answer boxes.

Answer 1

(a). Contribution margin per unit = $39

Explanation;

Contribution margin per unit = Sale price – Variable expense

Contribution margin per unit = $104 – $65

= $39

(b). Contribution rate = 37.50%

Explanation;

Contribution rate = Contribution margin / Sale price

Contribution rate = $39 / $104

= 37.50%

(c). Break-even point in units = 14.10 units OR 15 units (Approx.)

Explanation;

Break-even point in units = Fixed expenses / Contribution margin per unit

Break-even point in units = $550 / $39

= 14.10 units OR 15 units (Approx.)

(d). Break-even point in sales dollars = $1,466.67 OR $1,467 (Approx.)

Explanation;

Break-even point in sales dollars = (Fixed expenses * Sale price) / Contribution margin per unit

Break-even point in units = $550 * $104) / $39

= $1,466.67 OR $1,467 (Approx.)