rice, Variable Cost per Unit, Contribution Margin, Contribution Margin Ratio, Fi

Question

rice, Variable Cost per Unit, Contribution Margin, Contribution Margin Ratio, Fixed Expense

For each of the following independent situations, calculate the amount(s) required.

Required:

1. At the break-even point, Jefferson Company sells 115,000 units and has fixed cost of $351,800. The variable cost per unit is $0.10. What price does Jefferson charge per unit? Round to the nearest

2. Sooner Industries charges a price of $77 and has fixed cost of $461,000. Next year, Sooner expects to sell 18,500 units and make operating income of $192,000. What is the variable cost per unit? What is the contribution margin ratio? Round your variable cost per unit answer to the nearest cent. Enter the contribution margin ratio as a percentage, rounded to two decimal places.

3. Last year, Jasper Company earned operating income of $18,240 with a contribution margin ratio of 0.2. Actual revenue was $228,000. Calculate the total fixed cost. Round your answer to the nearest dollar, if required.
$

4. Laramie Company has variable cost ratio of 0.6. The fixed cost is $108,000 and 21,000 units are sold at breakeven. What is the price? What is the variable cost per unit? The contribution margin per unit? (Round answers to the nearest cent.)

Explanation / Answer

Answer 1:

At break-even point, the profit is zero

Let the Selling Price per unit be X

Profit = Sales – Variable cost – Fixed cost
0 = (X*115,000) – ($0.10*115,000) – $351,800
0 = 115,000 X– 11,500 – $351,800
115,000 X = 0+ $11,500+ $351,800
115,000 X = $363,300
X = $363,300 / 115,000
X = 3.16

The selling price per unit is $3.16 at break-even point on sell of 115,000 units

Answer 2:

Operating Income = $ 192,000
Fixed cost = $461,000

Let the variable cost be X

Operating Income = Sales – Variable cost – Fixed cost
$192,000 = ($77 * 18,500) – (X * 18,500) - $461,000
$192,000 = $1,424,500 – 18,500 X - $461,000
18,500 X = $1,424,500 - $461,000 - $192,000
18,500 X = $771,500
X = 771,500 / 18,500
Variable cost per unit (X) = $41.70

Contribution margin per unit = Selling price per unit – Variable cost per unit
Contribution margin per unit = $77- $41.70
Contribution margin per unit = $35.30

Contribution margin ratio = Contribution margin per unit / selling price per unit *100
Contribution margin ratio = $35.3 / $77 *100
Contribution margin ratio = 45.84%

Answer 3:

Contribution Margin = 0.2 * Revenue
Contribution margin = 0.2* $288,000
Contribution margin = $45,600

Let the fixed cost be X

Operating Income = Contribution margin - Fixed cost
$18,240 = $45,600 - X
X = $45,600 - $18,240
X =$27,360

Fixed Cost is $27,360

Answer 4:

Let the selling price per unit be X

At Break-even point there is no profit

Profit = Sales – Variable cost – Fixed cost
0 = 21,000 * X – 21,000 * 0.6 X - $108,000
0 = 21,000 X - $12,600 X - $108,000
0 = 8,400 X - $108,000
8,400 X = $108,000
X= $108,000 / 8,400
X = $12.86

Selling price per unit is $12.86

Price = Units * selling price per unit
Price = 21,000 * $12.86
Price = $270,060

Variable cost per unit = 0.6 * $12.86
Variable cost per unit = $7.72

Contribution margin per unit = sales per unit – variable cost per unit
Contribution margin per unit = $12.86 - $7.72
Contribution margin per unit = $5.14

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