Use the following information to answer the questions below. Fixed costs $54,000

ID: 2375647 • Letter: U

Question

Use the following information to answer the questions below.

Fixed costs $54,000

Selling price per unit $50

Variable cost per unit $20

a. What is the contribution margin per unit? (2)

b. What is the break-even point in units? (3)

c. What is the contribution ratio? (2)

d. What is the break-even point in sales? (3)

e. How many units must be sold in order to earn a profit of $90,000? (3)

f. At a profit of $90,000 what would be the margin of safety in units? (2)

g. At a profit of $90,000 what would be the margin of safety in sales dollars? (2)

h. A new employee suggests the company spend $5,000 on advertising. How many more units must be sold to cover this cost? (3)

1. CM = 30

2. brk even ,

50x = 54000+20x

x = 54000/30 =1800

3. ratio = 30/50 = 3/5 = .6

4. in sales = 1800*50 =90000

5. 90000 = 30x-54000

144000/30= x = 4800

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