EasyWriter manufactures an erasable ballpoint pen, which sells for $1,75 per uni

Question

EasyWriter manufactures an erasable ballpoint pen, which sells for $1,75 per unit. Management recently finished analyzing the results of the company's operations for the current month. At a break-even point of 40,000 units, the company's total variable costs are $50,000 and its total fixed costs amount to $20,000. A-Calculate the contribution per unit. B-Calculate the company's margin of safety if monthy sales total 45,000 units. C-Estimate the company's monthly operating loss if it sells only 38,000 units. D-Compute the total cost per unit at a production of of (1) 40,000 pens per month and (2) 50,000 pens per month. Explain the reason for the change in unit costs. Thank you!

Explanation / Answer

A. Contribution margin per unit Total sales at break even = 70000 Total variable costs at break even = 50000 Contribution margin = 20000 Contribution margin per unit = $0.50 (20000/40000) B. 45000 * .50 = 22500 Margin of safety = 2500 (22500-20000_ C. 38000*.50 = 19000 Operating loss = 1000 (19000-20000) D. Cost per unit = variable cost per unit + Fixed cost per unit 1) 40000 pens Variable cost = 50000/40000 = 1.25 (this will not change no matter how many we manufacture) Fixed cost = 20000/40000 = 0.50 Cost per unit: 1.75 2) 50000 Variable cost = 1.25 Fixed cost = 20000/50000 = 0.40 Cost per unit: 1.65 Hope this helps!

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.