Question

Cost-volume profit analysis reclined company is planning to produce and sell 11,250 units of its only product at a unit price of $106. At this sales level recline company will generate $405,000 in total contribution margin and incur fixed cost of $25/unit.

A. Calculate reclines contribution margin ratio.

B. Calculate the break-even point in sales dollars for recline?

Answer 1

The contribution margin it's determined by the total amount of Gross Profit divided by the total value of sales.

Profit = $405,000

Sales = 11,250×106 =$1,192,500

Therefore contribution margin ratio = ($405,000/$1,192,500) = 0.34

The Break Even point is given thus;

Fixed cost = 25 × 11250 =$281,250

Break-even point = Fixed costs ÷ contribution ratio

= $281,250/0.34 = $827,205.88