Question

The following is information concerning a product manufactured by Ames Brothers. Sales price per unit $ 68 Variable cost per unit 43 Total fixed manufacturing and operating costs (per month) 430,000 a. Determine the unit contribution margin. b. Determine the number of units that must be sold each month to break even. (Round your answer to the nearest whole number.) c. Determine the number of units that must be sold to earn an operating income of $234,000 per month. (Round your answer to the nearest whole number.)

Answer 1

Ames Brothers

a. Unit contribution margin = $25

b. Break-even units

= 17,200 units

c. Break-even units to earn a target profit

= 26,560 units

Step-by-step explanation:

a) Data and Calculations:

Sales price per unit $ 68

Variable cost per unit 43

Contribution per unit $25

Total fixed manufacturing and operating costs (per month) 430,000

Target operating income = $234,000 per month

a. Unit contribution margin = $25

b. Break-even units = Fixed cost/Contribution margin per unit

= $430,000/$25

= 17,200 units

c. Break-even units to earn an operating income = (Fixed cost + Target Profit)/Contribution margin per unit

= ($430,000 + $234,000)/$25

= $664,000/$25

= 26,560 units