Maurice company has $200 selling price per unit for its product. Variable cost o
ID: 2573875 • Letter: M
Question
Maurice company has $200 selling price per unit for its product. Variable cost of the product is $150 per product. Its fixed cost is $180,000.i. Calulate the contribution margin. ii. Calulate the contribution margin ratio. iii. Calculate the break even point in dollars iv. If the company has a target profit if $20000, what will be the new breakeven ooint in units?
Maurice company has $200 selling price per unit for its product. Variable cost of the product is $150 per product. Its fixed cost is $180,000.
i. Calulate the contribution margin. ii. Calulate the contribution margin ratio. iii. Calculate the break even point in dollars iv. If the company has a target profit if $20000, what will be the new breakeven ooint in units?
i. Calulate the contribution margin. ii. Calulate the contribution margin ratio. iii. Calculate the break even point in dollars iv. If the company has a target profit if $20000, what will be the new breakeven ooint in units?
Explanation / Answer
i) Contribution margin = Sales price-Varible Cost
Therefore Contribution Margin in given problem = $200(Sales price per unit) - $150 (Variable Cost) = $50
ii) Contribution Margin Ratio = Contribution Margin Per Unit/Sales price per unit*100
=$50(Contribution margin above)/$200(Sales price)*100 =25%
iii) Break Even point is the points in Sales Value or Units where in there are no Profits and No Losses
Break Even Point in $ = Fixed Cost/Contribution Margin per unit*Sales price per Unit
= $180,000(Fixed Cost)/$50(Contribution Margin per unit)*$200(Sales Price Per Unit)
= $720,000
iv) If Target Profit is $20,000, Break Even Units = (Fixed Cost+TargetProfit)/Contribution Marginper unit
= ($1,80,000+$20,000)/$50
= 4000 Units
This implies 4000 units are required to be sold in order to cover our Fixed and variable costs and also achive $20,000 Profit.