Question

Perfect Stampers makes and sells aftermarket hub caps. The variable cost for each hub cap is $4.75, and the hub cap sells for $9.95. Perfect Stampers has fixed costs per month of $3,120. Compute the contribution margin per unit and the break-even sales in units and in dollars for the month. Round the contribution margin per unit to two decimal places.

Answer 1

Answer:

Contribution margin per unit =  52,26%

break-even sales in units =  600

break-even sales in units =   $5,970.15

Explanation:

Contribution margin per unit = Contribution / Selling Price × 100

                                               = ( $9.95 - $4.75 ) / $9.95  × 100

                                               = 52,26%

break-even sales in units = Fixed Costs / Contribution per unit

                                          =  $3,120 /  ( $9.95 - $4.75 )

                                          =  $3,120 / $5.20

                                          =  600

break-even sales in units = Fixed Costs / Contribution margin

                                          =  $3,120 / 52,26%

                                          =  $5,970.15

Answer 2

Answer:

Contribution margin per unit = $5.20

Break-even sales in units = 600 units

Break-even sales in dollars = $5,970

Explanation:

Contribution margin per unit = Selling price - variable cost = $9.95 - $4.75 = $5.20

Break-even sales in units = Fixed cost ÷ Contribution margin per unit = $3,120 ÷ $5.20 = 600 units

Contribution margin ratio = Contribution margin per unit ÷ Selling price = $5.20 ÷ $9.95 = 0.522613065326633  

Break-even sales in dollars = Fixed cost ÷ Contribution margin ratio = $3,120 ÷ 0.522613065326633  = $5,970