Exercise 22-7 In the month of March, Style Salon services 560 clients at an aver

Question

Exercise 22-7 In the month of March, Style Salon services 560 clients at an average price of $120. During the month, fixed costs were $21,024 and variable costs were 60% of sales. Determine the contribution margin in dollars, per unit, and as a ratio. (Round answers to 0 decimal places, e.g. 1,225.) Contribution margin $ Contribution margin per unit $ Contribution margin ratio % LINK TO TEXT LINK TO TEXT Using the contribution margin technique, compute the break-even point in dollars and in units. (Round answers to 0 decimal places, e.g. 1,225.) Break-even sales $ Break-even sales units

Explanation / Answer

Sales (560*$120) $ 67,200 Less: variable cost ($67,200*60%) $ 40,320 Contribution margin in dollars $ 26,880 Contribution margin per unit ($26,880/560) $          48 Contribution margin ratio ($26,880/$67,200) 40% Break even point in units = Total Fixed Expenses / Contribution margin Break even point in units = $21,024 / $48 Break even point in units = 438 Units Break even point in dollars = Total Fixed Expenses / Contribution margin ratio Break even point in dollars = $21,024/40% Break even point in dollars = $52,560

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