Answer:
The company's CM ratio: 0.5
Its break-even point in units: 14,300 units and in dollars: $286,000
Explanation:
Variable expense per unit = Variable expenses/ number of units = $128,000/12,800 = $10
The contribution margin ratio is calculated by using following formula:
Contribution margin ratio = (Sales - Total Variable cost)/Sales = ($256,000 - $128,000)/$256,000 = 0.5
The break-even point is the level of production at which the costs of production equal the revenues for a product and calculated by using following formula:
Break-even point in units = Fixed expense/(Selling price per unit-Variable expense per unit) = $143,000/($20 - $10) = 14,300 units
Break-even point in dollars = 14,300 units x Selling price per unit = 14,300 x $20 = $286,000