The following is information concerning a product manufactured by Ames Brothers.

Question

The following is information concerning a product manufactured by Ames Brothers. sales price per unit Variable cost per unit Total fixed manufacturing and operating costs (per month) 43 390,000 a. Determine the unit contribution margin. b. Determine the number of units that must be sold each month to break even. (Round your answer to the nearest whole number.) c. Determine the number of units that must be sold to earn an operating income of $234,000 per month. (Round your answer to the nearest whole number.) a. Unit contribution margin b. Break-even units c. Target sales in units

Explanation / Answer

a.

Unit contribution margin = Sale sprice per unit - Variable cost per unit

= $77 - $43

= $34

b.

Units to be sold to breakeven = Fixed costs / Unit contribution margin

= $390,000 / $34

= 11,471 units

c.

Units to be sold to earn desired operating income = (Fixed costs + Desired operating income) / Unit contribution margin

= ($390,000 + $234,000) / $34

= 18,353 units

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