Question

Price, Variable Cost per Unit, Contribution Margin, Contribution Margin Ratio, Fixed Expense For each of the following independent situations, calculate the amount(s) required. Required: 1. At the break-even point, Jefferson Company sells 115,000 units and has fixed cost of $349,600. The variable cost per unit is $4.56. What price does Jefferson charge per unit? Note: Round your answer to the nearest cent. $ 2. Sooner Industries charges a price of $120 and has fixed cost of $458,000. Next year, Sooner expects to sell 15,600 units and make operating income of $166,000. What is the variable cost per unit? What is the contribution margin ratio? Note: Enter the contribution margin ratio as a percentage, rounded to two decimal places. Variable cost per unit $ per unit Contribution margin ratio % 3. Last year, Jasper Company earned operating income of $22,500 with a contribution margin ratio of 0.25. Actual revenue was $235,000. Calculate the total fixed cost to the nearest whole dollar. $ 4. Laramie Company has a variable cost ratio of 0.56. The fixed cost is $103,840 and 23,600 units are sold at break-even. What is the price? What is the variable cost per unit? The contribution margin per unit? Note: Round answers to the nearest cent. Price $ Variable cost per unit $ Contribution margin per unit $

Answer 1

Answer and Explanation:

The computation is shown below:

1. Given that    

Break even point units  115000 units  

Fixed cost = $349,600  

As we know that  

CM per unit is

=  Fixed cost  ÷  Break even units  

= $349,600  ÷ 115,000

= 3.04 per unit  

Now

Selling price = Variable cost  +CM per unit  

= $4.56 + $3.04

= $7.60 per unit  

2.  Given that

Net Income at 15600 units is $166,000  

Fixed cost = $458,000  

So,  

Contribution is

= $458,000 + $166,000

= $624,000  

Now

CM per unit is

= $624,000  ÷ 15,600

= 40 per unit  

Selling price per unit: 120  

So,  

Variable cost per unit is

= $120 - 40

= 80 per unit  

And,

CM ratio is

= CM per unit ÷ Selling price per unit  

= $40 ÷ 120 × 100

= 33.33%  

3. Given that      

Net Operating income = $22,500    

CM ratio = 25%    

Actual revenue = $235,000  

So,  

Contribution earned is

= $235,000 × 25%

= $58,750  

Now

Fixed cost = Contribution - Net income  

= $58,750 - $22,500

= $36,250  

4. Given that      

Variable cost ratio = 56%    

Fixed cost = $103,840    

Break even units= 23600 units

So,    

CM per unit is

= $103,840 ÷ 23,600

= $4.40  

CM ratio = 100 - 56% = 44%

And, the Selling price per unit is

= $4.40 ÷ 44%

= $10 per unit  

Now

Variable cost per unit is

= $10 × 56%

= $5.60 per unit  

And,

Contribution per unit is

= $10 × 44%

= $4.40 per unit