is the exclusive distributor for an automotive product that

is the exclusive distributor for an automotive product that sells for $46.00 per unit and has a CM ratio of 30%. The company\'s fixed expenses are $303,600 per year. The company plans to sell 25,800 units this year 2. What is the break-even point in unit sales and in dollar sales? that by using a more e

Solution

Solution:

Selling price per unit = $46

Contribution margin ratio = 30%

Contribution per unit = 46*30% = $13.80 per unit

1. Variable cost per unit = Selling price per unit - contribution per unit = $46 - $13.80 = $32.20 per unit

Fixed Cost = $303,600

2. Break even point (In units) = Fixed Cost / Contribution per unit = $303,600 / 13.80 = 22000 units

Break even point (in dollar sales) = Breakeven point in unit * selling price per unit = 22000*46 = $1,012,000

Target profit = $165,600

Target contribution = Fixed cost + Target profit = $303,600 + $165,600 = $469,200

3. Target sale (In units) = Target contribution / contribution per unit = $469,200 / 13.80 = 34000 units

Target Sale (In dollar) = 34000*46 = $1,564,000

Redcution in variable expenses per unit = $4.60 per unit

Revised variable cost per unit = $32.20 - $4.60 = $27.60

Revised contribution per unit = 46 - 27.60 = $18.40

4. Revised Breakeven point (In units) = $303,600 / 18.40 = 16500 unit

Revised break even point (In dollar sale) = 16500*46 = $759,000