Question

Dodero Company produces a single product which sells for $100 per unit. Fixed expenses total $12,000 per month, and variable expenses are $60 per unit. The company's sales average 500 units per month. Which of the following statements is correct?

a. The company's break-even point is $12,000 per month.
b. The fixed expenses remain constant at $24 per unit for any activity level within the relevant range.
c. The company's contribution margin ratio is 40%.
d. Responses A, B, and C are all correct.

Answer 1

c. The company's contribution margin ratio is 40%.

Step-by-step explanation:

Contribution margin ratio = contribution margin / revenue

contribution margin = total revenue - total variable cost

$100 - $60 = $40

$40 / $100 = 0.4

Breakeven pont = fixed cost / price - variable cost

$12,000 / $100 - $60 = 300

fixed cost per unit decreases as sales increases and decreases as sales decreases