In the month of September, Matlock Industries sold 800 units of product. The ave

Question

In the month of September, Matlock Industries sold 800 units of product. The average sales price was $30. During the month, fixed costs were $6,300 and variable costs were 70% of sales.

Determine the contribution margin in dollars, per unit, and as a ratio.

Contribution margin (in dollars) $____

Unit contribution margin $____

Contribution margin ratio ____%

Using the contribution margin technique, compute the break-even point in dollars and in units.

Explanation / Answer

1) Contribution margin = Sales - Variable costs = (800 × $30) - ($24,000 × 70%) = $24,000 - $16,800 = $7,200

Contribution margin per unit = Unit sales price - Variable cost per unit = $30 - ($30 × 70%) = $30 - $21 = $9

Contribution margin ratio = $9 ÷ $30 = 30%

2) Break-even sales (in dollars) = Fixed costs ÷ Contribution margin ratio = $6,300 ÷ 30% = $21,000

Break-even sales (in units) = Fixed costs ÷ Contribution margin per unit = $6,300 ÷ $9 = 700 units

Related Questions

Navigate

• Browse (All)
• Browse I
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.