Question

Millar Company produces a single product which it sells for $89 a unit. If the fixed costs of manufacturing and selling the product are $68,400 a month and the variable costs are $57 a unit, which of the below is correct? Select one: a. An increase in sales volume above $68,400 a month will cause an increase in fixed costs. b. The contribution margin per unit of product is $32. c. The fixed costs amount to $32 per unit at any level of output within a relevant volume range. d. The company will break even with a sales volume of $68,400 a month.

Answer 1

b. The contribution margin per unit of product is $32.

Step-by-step explanation:

Millar Company

Sale Price = $89 per unit

Fixed Cost = $68,400 per month

Variable Cost = $57 per unit

a. Fixed Costs are the cost that do not increase or decrease with the change in the amount of goods and services. For instance, Rent of the premises or salaries of employees.

b. Contribution Margin Per Unit = Sale Price per unit - Variable Cost per unit

Contribution Margin Per Unit = $89 per unit - $57 per unit

Contribution Margin Per Unit = $32

c. Fixed Cost will remain same and will not vary accordingly.

d. At break even Fixed Cost is equal to variable cost and not sales volume.