Question

Goff Corporation sells products for $122.50 each that have variable costs of $88 per unit. Goff's fixed cost is $810,750. Required: Calculate the contribution margin per unit, then use the per unit contribution margin approach to find the break-even point in units and dollars.

Answer 1

The contribution margin per unit for Goff Corporation is $34.50. The break-even point in units is 23,500, and in dollars, it is $2,879,750.

Step-by-step explanation:

The contribution margin per unit is calculated by subtracting the variable costs per unit from the selling price per unit. In this case, the contribution margin per unit for Goff Corporation would be $122.50 (selling price) - $88.00 (variable cost) = $34.50 per unit. To find the break-even point in units, we divide the fixed costs by the contribution margin per unit. Therefore, the break-even point in units is $810,750 (fixed costs) ÷ $34.50 (contribution margin per unit) = 23,500 units. To calculate the break-even point in dollars, multiply the break-even point in units by the selling price per unit, which is 23,500 units * $122.50 = $2,879,750.