Chapter 21, Problem 6QS

To determine

Introduction:

Contribution Margin per unit is the excess between Selling Price per unit and Total Variable Costs per unit associated with the product. It is that proportion of Revenue per unit which is left after deduction of Total Variable Costs per unit.

Break- even point is calculated by dividing Total Fixed Costs incurred by Contribution Margin per unit of the product. It is a point where Total Revenue equals the Total Costs of the concern. In simple terms, it is the point where there is no profit or loss. After this point, Revenue begins to exceed the Costs incurred.

To determine:

(1) Contribution Margin per unit and (2) Break- even point in units of SBD Phone Company