Question

Lasley Cash, Ltd. operates a chain of exclusive ski hat boutiques in the western United States. The stores purchase several hat styles from a single distributor at $12 each. All other costs incurred by the company are fixed. Lasley Cash, Ltd. sells the hats for $25 each. If fixed costs total $130,000 per year, what is the breakeven point in units? In sales dollars? (Use your answer of breakeven units to calculate the breakeven point in dollars.) The breakeven point hats The breakeven sales $ LINK TO TEXT LINK TO VIDEO What is Lasley Cash’s contribution margin ratio? Its variable cost ratio? (Round ratios to 2 percentage places, e.g. 0.38 = 38%.) Contribution margin ratio % Variable cost ratio %

Answer 1

Answer:

CMR: 52% --> each dollar of sales generates 52 cent of contribution

VCR: 48% --> 48 cent per dollar of sales are cost

BEPu:    10,000 units will pay up the cost to purchasethis units and the fixed cost for the business.

BEPs: $ 250,000 in sales pay up both, fixed and varible operating cost.

Explanation:

selling price per hat:  $ 25

variable cost per hat: $  12

Contribution per unit $  13

Contribution Ratio:

13/25 = 0.52

Variable cost Ratio:

12/25 = 0.48

Fixed cost: 130,000

Break even point:

$\frac{Fixed\:Cost}{Contribution \:Margin \:Ratio} = Break\: Even\: Point_{dollars}$

$\frac{130,000}{0.52} = Break\: Even\: Point_{dollars}$

dollars of sales BEP: 250,000

$\frac{Fixed\:Cost}{Contribution \:Margin} = Break\: Even\: Point_{units}$

$\frac{130,000}{13} = Break\: Even\: Point_{units}$

units sold to pay up variable and fixed cost: 10,000