Answer:
1. Regular models 24,000
Deluxe models 3,556
2.17.4354%
Explanation:
1. Computation for the number of regular models and deluxe models that must be sold to break even
REGULAR MODEL:
First step is to calculate the Contribution per unit using this formula
Contribution per unit=Contribution/No.ofunits
Let plug in the formula
Contribution per unit=$4,500,000/90
Contribution per unit=50
Now let calculate the Break even units using this formula
Break even units=Direct fixed costs/Contribution per unit
Let plug in the formula
Break even units=$1,200,000/50
Break even units=24,000
DELUXE MODEL:
First step is to calculate the Contribution per unit using this formula
Contribution per unit=Contribution/No.ofunits
Let plug in the formula
Contribution per unit=$4,860,000/18,000
Contribution per unit=270
Now let calculate the Break even units using this formula
Break even units=Direct fixed costs/Contribution per unit
Let plug in the formula
Break even units=960,000/270
Break even units=3,556
Therefore the number of regular models and deluxe models that must be sold to break even are:
Regular models 24,000
Deluxe models 3,556
2. Computation for the sales revenue that must be generated for the company to break even
First step is to calculate the Break-even sales -
Break-even sales = 16,290,000 + 2,160,000 + 1,280,000
Break-even sales = 19,730,000
Second step is to calculate the Contribution Using this formula
Contribution = Break-even sales - Variable costs
Let plug in the formula
Contribution = 19,730,000 - 16,290,000
Contribution = $3,440,000
Now let calculate the Contribution margin ratio using this formula
Contribution margin ratio=Contribution/Break even sales *100
Contribution margin ratio=$3,440,000/$19,730,000*100
Contribution margin ratio=17.4354%
Therefore the Contribution margin ratio is 17.4354%
