Question

Contribution margin per unit and break-even units LO P2 SBD Phone Company sells its waterproof phone case for $90 per unit. Fixed costs total $135,000, and variable costs are $36 per unit.

(1) Determine the contribution margin per unit.
(2) Determine the break-even point in units.

Answer 1

Instructions are below.

Step-by-step explanation:

Giving the following information:

Selling price= $90

Unitary variable cost= $36

Fixed costs= $135,000

First, we need to calculate the contribution margin per unit.

Contribution margin= selling price - unitary variable cost

Contribution margin= 90 - 36= $54

To calculate the break-even point in units, we need to use the following formula:

Break-even point in units= fixed costs/ contribution margin per unit

Break-even point in units= 135,000 / 54

Break-even point in units= 2,500 units