Question

following is information concerning a product manufactured by Ames Brothers. Sales price per unit $ 950 Variable cost per unit 570 Total fixed manufacturing and operating costs (per month) 5,700,000 a. Determine the unit contribution margin. b. Determine the number of units that must be sold each month to break even. c. Determine the number of units that must be sold to earn an operating income of $7,600,000 per month

Answer 1

Instructions are below.

Step-by-step explanation:

Giving the following information:

Sales price per unit $950

Variable cost per unit $570

Total fixed manufacturing and operating costs= $5,700,000

First, we need to calculate the contribution margin:

Contribution margin= selling price - unitary variable cost

Contribution margin= $380

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= 5,700,000/380

Break-even point in units= 15,000 units

Finally, the desired profit is $7,600,000

Break-even point in units= (fixed costs + desired profit) / contribution margin per unit

Break-even point in units= (5,700,000 + 7,600,000) / 380

Break-even point in units= 35,000 units