Question

Price, Variable Cost per Unit, Contribution Margin, Contribution Margin Ratio, Fixed Expense For each of the following independent situations, calculate the amount(s) required.

Required:

a. At the break-even point, Jefferson Company sells 115,000 units and has fixed cost of $349,600. The variable cost per unit is $4.56. What price does Jefferson charge per unit?
b. Sooner Industries charges a price of $120 and has fixed cost of $458,000. Next year, Sooner expects to sell 15,600 units and make operating income of $166,000. What is the variable cost per unit? What is the contribution margin ratio?
c. Last year, Jasper Company earned operating income of $22,500 with a contribution margin ratio of 0.25. Actual revenue was $235,000. Calculate the total fixed to the nearest whole dollar.
d. Laramie Company has a variable cost ratio Of 0.56. The fixed cost is $103,840 and 23,600 units are sold at break-even. What is the price? What is the variable cost per unit? The contribution margin per unit? Note: Round answers to the nearest cent.

Answer 1

The calculations are shown below.

Step-by-step explanation:

The computation is shown below:

a. The price charged per unit is

= Variable cost per unit + Contribution margin per unit

where,

Variable cost per unit is $4.56

And, the contribution margin per unit is

Contribution margin per unit = Fixed cost ÷ Break even units

$349,600 ÷ 115000

= $3.04 per unit

So, the price charged is

= $4.56 + $3.04

= $7.60 per unit

b. The variable cost per unit is

= Selling price per unit - contribution margin per unit

where,

Selling price per unit = $120

And, the Contribution margin per unit is

= ($458,000 + $166,000) ÷ 15,600 units

= $40 per unit

So, the variable cost per unit is

= $120 - $40

= $80 per unit

And, the contribution margin ratio is

= Contribution margin per unit ÷ Selling price per unit

= $40 ÷ $120 × 100

= 33.33%

c. The total fixed cost is

= Contribution - Net income

= $235,000 × 0.25 - $22,500

= $58,750 - $22,500

= $36,250

d. Contribution margin per unit is

= $103,840 ÷ 23,600 units

= $4.40 per unit

And, Selling price per unit is

= $4.40 ÷ 44%

= $10 per unit

And, Variable cost per unit is

= $10 × 56%

= $5.60 per unit

Since the variable cost ratio is 0.56

So, we assume the sales is 0.100

And, the contribution margin ratio is 0.44