Question

The following is information concerning a product manufactured by Ames Brothers. Sales price per unit $ 79 Variable cost per unit 43 Total fixed manufacturing and operating costs (per month) 410,000 a. Determine the unit contribution margin. b. Determine the number of units that must be sold each month to break even. (Round your answer to the nearest whole number.) c. Determine the number of units that must be sold to earn an operating income of $234,000 per month. (Round your answer to the nearest whole number.

Answer 1

a. The determination of the unit contribution margin is $36 per unit ($79 - $43).

b. The determination of the units to be sold for the company to break-even in units is (Fixed costs/contribution margin per unit)

= 11,389 units ($410,000/$36).

c. The determination of units to sell to earn an operating income of $234,000 is (Fixed costs + Operating income)/Contribution margin per unit

= 17,889 units ($410,000 + $234,000)/$36.

Data and Calculations:

Sales price per unit = $79

Variable cost per unit = $43

Contribution margin per unit = $36 ($79 - $43)

Fixed manufacturing and operating costs per month = $410,000

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