A firm is able to sell 10000 units at 12 per piece the compa

A firm is able to sell 10,000 units at $12 per piece. the company fixed cost is $30,000. Variable cost is $6 per unit.

a. What is the contribution per unit?

b. What is the breakeven sales in $? What is the breakeven sales in units?

c. What is the markup on sales price? What is the mark up on total cost?

Solution

Following is the given information in the problem

Sales = 10,000

Sales Price per unit = $12

Total Revenue = 12 x 10000

= $120,000

Fixed Cost = $30,000

Variable cost = $6

Total Variable Cost = 6 x 10000

= 60000

a) Contribution per unit = (Total Revenue - Total Variable Cost) / Sales price per unit

= (120000 - 60000) / 12

= 60000 / 12

= 5,000

The contribution per unit is 5,000

b) Break-even sales in units = Fixed Cost / (Sales price per unit - Variable price per unit)

= 30000 / (12 - 6)

= 30000 / 6

= 5,000

The break even sales in units is 5,000

Break even sales in $ = Sales price per unit x Break even sales in units

= 12 x 5000

= $60,000

Break even sales is $60,000

c) Markup on sales price = (Total Revenue - Total Variable cost) / Total Revenue

= (120000 - 60000) / 120000

= 60000 / 120000

= 0.5

= 50%

The markup on sales price is 50%

Mark up on total cost = (Total Revenue - (Fixed Cost + Variable Cost)) / Total Revenue

= (120000 - (30000 + 60000)) / 120000

= (120000 - 90000) / 120000

= 30000 / 120000

= 0.25

= 25%

The markup on total cost is 25%