Separately, we make monorail cars. We only make one type, and its contribution m

Question

Separately, we make monorail cars. We only make one type, and its contribution margin ratio is 40%. Fixed costs for this product line are $4,000,000, and selling price per car is $320,000.

a.  What are our breakeven revenues for this product line?

b.  What are our breakeven units for this product line?

We make train cars. We currently make three car types: Metro, MetroLux, and Freight. Here's how our products' costs and mix look. Metro MetroLux Freight Combined Units Selling price Variable cost Sales ratio Total fixed costs 550,000 300,000 35% 742,500 592,000 150,500 800,000 1,000,000 740,000780,000 50% 20,000,000 15% Total MetroMetroLux Freight 46.51 1 How many train cars must we sell to break even, and how many will be of each type? 2 How many cars must we sell to earn a $35 million profit, and how many will be of each type? 132.89 365.45 182.72 19.93 54.82 127.91 66.45

Explanation / Answer

a)Breakeven Revenue = Fixed cost / contribution margin

                       = 4,000,000 / .40

                       = $ 10,000,000

b)contribution per car = price* CM ratio

                 = 320000*.40

                 = 128000

BEP(units) =Fixed cost /contribution per car

              = 4,000,000 / 128000

               = 31.25 cars [rounded to 32 cars ]

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