ScholarPak Company produced and sold 76,000 backpacks during the year just ended

Question

ScholarPak Company produced and sold 76,000 backpacks during the year just ended at an average price of $36.00 per unit. Variable manufacturing costs were $15.00 per unit, and variable marketing costs were $7.20 per unit sold. Fixed costs amounted to $546,000 for manufacturing and $220,800 for marketing. There was no year-end work-in-process inventory. (Ignore income taxes.)

Compute ScholarPak

ScholarPak Company produced and sold 76,000 backpacks during the year just ended at an average price of $36.00 per unit. Variable manufacturing costs were $15.00 per unit, and variable marketing costs were $7.20 per unit sold. Fixed costs amounted to $546,000 for manufacturing and $220,800 for marketing. There was no year-end work-in-process inventory. (Ignore income taxes.)

Compute ScholarPak

Explanation / Answer

Contribution per unit=Sale price-Variable cost per unit

=36-15-7.2

=$13.8

Total fixed costs=Manufacturing+marketing

=$546000+220800

=$766800

Break even point($)=Fixed costs/contribution per unit*Sales

=766800/13.8*36

=$2000347.86

2)Break even sales=766800+570000/13.8

=96869.57 units

3)New Contribution=36-16.5-7.2

=$12.3

Break even sales=766800/12.3*36

=$2244292.68

4)Contribution ratio=13.8/36

=38.33%

Total variable cost per unit=16.5+7.2

=$23.7

So price=23.7/(1-0.3833)

=

$38.43

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