Beauty Supplies Company manufactures and sells several ranges of artwork. The average revenue and cost of sales are as follows: Selling price per unit $30.00 Variable costs per unit: Direct materials $7.00 Direct manufacturing labor $2.40 Manufacturing overhead $0.60 Selling costs $3.00 Annual fixed costs $108,000 a) Calculate the contribution margin per unit. Calculate the number of units Beauty Supplies Company must sell each year to break even. Calculate the number of units Beauty Supplies Company must sell to yield a profit of $160,000.
Beauty Supplies Company manufactures and sells several ranges of artwork. The average revenue and cost of sales are as follows: Selling price per unit $30.00 Variable costs per unit: Direct materials $7.00 Direct manufacturing labor $2.40 Manufacturing overhead $0.60 Selling costs $3.00 Annual fixed costs $108,000 a) Calculate the contribution margin per unit. Calculate the number of units Beauty Supplies Company must sell each year to break even. Calculate the number of units Beauty Supplies Company must sell to yield a profit of $160,000.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Beauty Supplies Company manufactures and sells several ranges of artwork. The average revenue and cost of sales are as follows:
|
Selling price per unit $30.00 |
|
|
Variable costs per unit: |
|
|
Direct materials |
$7.00 |
|
Direct manufacturing labor |
$2.40 |
|
Manufacturing |
$0.60 |
|
Selling costs |
$3.00 |
|
Annual fixed costs |
$108,000 |
|
a) Calculate the contribution margin per unit. |
|
- Calculate the number of units Beauty Supplies Company must sell each year to break even.
- Calculate the number of units Beauty Supplies Company must sell to yield a profit of $160,000.
- Managers may use Sensitivity analysis in their accounting system.
- What is sensitivity analysis?
- How is Sensitivity analysis useful to managers?
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