Exercise 18-10 In the month of March, Style Salon services 610 clients at an ave

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Exercise 18-10

In the month of March, Style Salon services 610 clients at an average price of $ 140 . During the month, fixed costs were $ 21,462 and variable costs were 65 % of sales.

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Exercise 18-10

In the month of March, Style Salon services 610 clients at an average price of $ 140 . During the month, fixed costs were $ 21,462 and variable costs were 65 % of sales.

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Explanation / Answer

Sales ($140*610) $ 85,400 Less; Variable cost ($85,400*65%) $ 55,510 Contribution margin $ 29,890 Sales price per unit $ 140 Variable cost per unit ($140*65%) $    91 Contribution margin per unit $    49 Contribution margin ratio = $49/140*100 = 35% Breakeven point in unit = Fixed costs / Contribution margin Breakeven point in unit = $21,462 / $49 Breakeven point in unit = 438 units Breakeven point in dollars = Breakeven point in units * unit price Breakeven point in dollars = 438*$140 = $61,320

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