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FIND: Total variable cost per batch sales price per batch using \"markup on vari

ID: 2443912 • Letter: F

Question

FIND:
Total variable cost per batch
sales price per batch using "markup on variable costs"
contribution margin per batch and contribution margin ratio
breakeven point in dollars and in units
the sales level in units to earn a target operating income of $60,000

GIVEN INFO:
sales price:
mark-up on toal variable costs per batch 150%

cost:
direct materials per batch $2
direct labor per batch $5
variable overhead costs per batch $0.40
variable selling and administrative costs per batch $0.60
fixed manufacturing cost $50,000
fixed administrative cost $30,000

Explanation / Answer

Total variable cost per batch
Direct Materials                                 $2.00
Direct labor                                       $5.00
Variable overhead                              $0.40
Variable Selling &
Administration overhead                    $0.60
Total Variable costs                         $8.00

sales price per batch using "markup on variable costs"
   $8.00 x 150% = $12.00 per batch

contribution margin per batch and contribution margin ratio
     $12.00 - $8.00 = $4.00
    
    S4.00 / $12.00 = 33-1/3 % (or 33.33%)

breakeven point in dollars and in units
Total Fixed costs = $50,000 + $30,000 = $80,000

BEP(Units ) = $80,000 / $4 = 20,000 batches

BEP(dollar) = $80,000 x 12 / $4 = $240,000

the sales level in units to earn a target operating income of $60,000
Fixed costs + Target operating income
= $80,000 + $60,000 = $140,000

Required sales(Units ) = $140,000 / $4 = 35,000 batches