Question

A product has a contribution margin per unit of $17 and sells at $25 per unit. If the break-even point is 82,000 units, calculate

a. the variable costs per unit and
b. the total fixed costs.

Answer 1

a. $8 b. $1,394,000

Step-by-step explanation:

The contribution margin per unit of a product is $17.

The price per unit is $25.

The break-even point is 82,000 units.

a. Contribution margin per unit = Sales per unit - AVC

$17 = $25 - AVC

AVC = $25 - $17

AVC = $8

So, the variable cost per unit is $8.

b. Fixed costs

=
`Breakeven\ in\ units* Contribution\ margin\ in\ units`

=
`82,000* 17`

= $1,394,000