In the month of September, Browning Company sold 800 units of product. The avera

Question

In the month of September, Browning Company sold 800 units of product. The average sales price was $45. During the month, fixed costs were $7,200 and variable costs were 60% of sales. Instructions a) Determine the contribution margin in dollars, per unit, and as a ratio. b) Using the contribution margin technique, compute the break-even point in dollars and in units. In the month of September, Browning Company sold 800 units of product. The average sales price was $45. During the month, fixed costs were $7,200 and variable costs were 60% of sales. Instructions a) Determine the contribution margin in dollars, per unit, and as a ratio. b) Using the contribution margin technique, compute the break-even point in dollars and in units.

Explanation / Answer

a). Contribution Margin = Sales price - Variable cost

= $45 - 60% of $45

= $45 - $27

= $18 per unit

Contribution Margin ration = 40%

b) Break - Even point = Fixed cost / Contribution margin

= 7200 / 18

= 400 units

Break - even point in dollars = 400 units * $45 = $18000

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