Concept Introduction:
Contribution Margin:
Contribution Margin is the amount of sales after adjusting variable costs. Contribution Margin is calculated with the help of following formulas:
Breakeven point:
The Breakeven point is level of sales at which the net profit is zero. In other words, the breakeven point is the amount of sales at which there no loss and no profit. The formulas to calculate breakeven point are as follows:
Requirement-1:
The Contribution margin per unit
Answer to Problem 19E
The Contribution margin per unit shall be $60
Explanation of Solution
The Contribution margin per unit is calculated as follows:
Contribution margin per unit = Sales Price − Variable Cost per unit
= 240-180 = 60
Concept Introduction:
Contribution Margin:
Contribution Margin is the amount of sales after adjusting variable costs. Contribution Margin is calculated with the help of following formulas:
Breakeven point:
The Breakeven point is level of sales at which the net profit is zero. In other words, the breakeven point is the amount of sales at which there no loss and no profit. The formulas to calculate breakeven point are as follows:
Requirement-2:
The Contribution margin Ratio
Answer to Problem 19E
The Contribution margin Ratio shall be 25%
Explanation of Solution
The Contribution margin Ratio is calculated as follows:
Contribution margin Ratio = (Sales Price − Variable Cost per unit) / Sales Price
= (240-180) / 240 = 25%
Concept Introduction:
Contribution Margin:
Contribution Margin is the amount of sales after adjusting variable costs. Contribution Margin is calculated with the help of following formulas:
Breakeven point:
The Breakeven point is level of sales at which the net profit is zero. In other words, the breakeven point is the amount of sales at which there no loss and no profit. The formulas to calculate breakeven point are as follows:
Requirement-3:
Breakeven Point in units
Answer to Problem 19E
Breakeven Point in units shall be 5,400 units
Explanation of Solution
The Breakeven Point in units is calculated as follows:
Breakeven Point = Total Fixed Cost / Contribution Margin per unit
= 324000 / 60
= 5400
Concept Introduction:
Contribution Margin:
Contribution Margin is the amount of sales after adjusting variable costs. Contribution Margin is calculated with the help of following formulas:
Breakeven point:
The Breakeven point is level of sales at which the net profit is zero. In other words, the breakeven point is the amount of sales at which there no loss and no profit. The formulas to calculate breakeven point are as follows:
Requirement-4:
Breakeven Point in Dollar
Answer to Problem 19E
Breakeven Point in Dollar shall be $1,296,000
Explanation of Solution
The Breakeven Point in Dollars is calculated as follows:
Breakeven Point (Dollars) = Total Fixed Cost / Contribution Margin Ratio
= 324000 / 25%
= 1296000
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Chapter 21 Solutions
Fundamental Accounting Principles
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