Question

Easywriter manufactures an erasable ballpoint pen, which sells for $1.75 per unit. management recently finished analyzing the results of the company's operations for the current month. at a break-even point of 40,000 units, the company's total variable costs are $50,000 and its total fixed costs amount to $20,000.
a. calculate the contribution margin per unit. (round your answer to 2 decimal places.)

b. calculate the company's margin of safety if monthly sales total 45,000 units.

c. estimate the company's monthly operating loss if it sells only 38,000 units. d-1. compute the total cost per unit at a production level of 40,000 pens per month. (round your answer to 2 decimal places.) d-2. compute the total cost per unit at a production level of 50,000 pens per month.

Answer 1

a. 50 cents

Contribution margin per unit is price per unit- variable cost per unit

1.75 - ($50,000/40,000 units)

1.75 - 1.25 = $ .50

b. $8750

Margin of safety is the expected sales - break even sales

(45,000 units * $1.75 per unit) - (40,000 *1.75)

78,750 - 70,000 = $8750