Question

Baker Company has a product that sells for $20 per unit. The variable expenses are $12 per unit, and fixed expenses total $30,000 per year. Required: What is the total contribution margin at the break-even point?

Answer 1

The total contribution margin at the break-even point for Baker Company, which sells products for $20 with $12 variable expenses and $30,000 fixed expenses, is $30,000.

Step-by-step explanation:

The student's question pertains to the calculation of the total contribution margin at the break-even point for Baker Company. The total contribution margin is calculated by subtracting variable expenses from sales price, multiplied by the number of units sold. At the break-even point, total revenues equal total fixed and variable costs. In this scenario where each product sells for $20 and variable expenses are $12 per unit, the contribution margin per unit is $20 - $12 = $8. To cover the fixed expenses of $30,000 a year at a contribution margin of $8 per unit, the company must sell 30,000 / 8 = 3,750 units to break even. Therefore, the total contribution margin at the break-even point is 3,750 units x $8, which equals $30,000.