Blanchard Company manufactures a single product that sells for $140 per unit and

Question

Blanchard Company manufactures a single product that sells for $140 per unit and whose total variable costs are $105 per unit. The company's annual fixed costs are S583,500. a) Compute the company's contribution margin per unit. (b) Compute the company's contribution margin ratio Contribution Margin Ratio Choose Numerator: Choose Denominator: Contribution margin ratio c) Compute the company's break-even point in units Choose Numerator: Choose Denominator: Break-Even Units Break-even units (d) Compute the company's break-even point in dollars of sales Choose Numerator: Choose Denominator: Break-Even Dollars Break-even dollars

Explanation / Answer

Given values:

Sales per unit = $140

Variable cost per unit = $105

Fixed costs = $563,500

Solution:

(a) Contribution margin = Sales per unit - Variable cost per unit

Contribution margin = $140 - $105

Contribution margin = $35 per unit

(b) Contribution margin ratio = (Contribution margin per unit / Sales per unit) x 100

Contribution margin ratio = ($35 / $140) x 100

Contribution margin ratio = 25%

(c) Breakeven point (in units) = Fixed costs / Contribution margin per unit

Breakeven point (in units) = $563,500 / $35

Breakeven point (in units) = 16,100 units

(d) Breakeven point (in dollars) = Fixed costs / Contribution margin ratio

Breakeven point (in dollars) = $563,500 / 25%

Breakeven point (in dollars) = $2,254,000

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