Question

Bloomfield Stores reported sales revenues of $675,000, a total contribution margin of $262,500, and fixed costs of $260,000. If sales volume amounted to 7,500 units, the company's variable cost per unit must have been:

Answer 1

$55

Step-by-step explanation:

The BEP which is the break even point is the point where the company's sales or revenue generated is equal to the cost incurred. As such, the BEP is the number of units that must be sold for the company to make neither a profit nor a loss.

Both sales and variable cost are dependent on the number of units sold.

The total sales less the total variable cost gives the contribution margin.

The contribution margin less the fixed cost gives the net operating income.

As such, let the total variable cost be V

$675,000 - V = $262,500

V = $675,000 - $262,500

V = $412,500

Given that the total units sold is 7,500 units,

Variable cost per unit = $412,500 /7500

= $55