Question

In the month of March, Sandhill Salon services 630 clients at an average price of $120. During the month, fixed costs were $26,160 and variable costs were 50% of sales. Determine the total contribution margin in dollars, the per unit contribution margin, and the contribution margin ratio. Contribution margin in dollars $ Contribution margin per unit $ Contribution margin ratio % eTextbook and Media Using the contribution margin technique, compute the break-even point in dollars and in units. Break-even sales $ Break-even sales

Answer 1

Part 1. total contribution margin in dollars

Total Contribution Margin = $37,800

Part 2. per unit contribution margin

contribution margin per unit of sell = $ 60

Part 3. contribution margin ratio

contribution margin ratio = 50 %

Part 4. break-even point in dollars

break-even point in dollars = $ 52,320

Part 5. break-even point in units

break-even point in units = 436 clients

Step-by-step explanation:

Part 1. total contribution margin in dollars

contribution margin per unit of sell = Sales Price × 50%

= $120 × 50%

= $ 60

Total Contribution Margin = Number of Clients × Contribution Margin per unit

= 630 × $60

= $37,800

Part 2. per unit contribution margin

contribution margin per unit of sell = Sales Price × 50%

= $120 × 50%

= $ 60

Part 3. contribution margin ratio

contribution margin ratio = Contribution / Sales

= $ 60/ $ 120

= 50 %

Part 4. break-even point in dollars

break-even point in dollars = Fixed Costs / contribution margin ratio

= $26,160 / 0.50

= $ 52,320

Part 5. break-even point in units

break-even point in units = Fixed Costs / contribution per unit

= $26,160 / $60

= 436 clients