A company manufactures and sells a single product with a variable costper unit of $36. It has a contribution ratio of 25%. The company has weeklyfixed costs of $18,000. What is the weekly breakeven point, in units?a) 1,500b) 1,600c) 1,800d) 2,000
Question
A company manufactures and sells a single product with a variable costper unit of 18,000. What is the weekly breakeven point, in units?a) 1,500b) 1,600c) 1,800d) 2,000
Solution
To calculate the breakeven point in units, we need to divide the fixed costs by the contribution margin per unit.
First, we need to calculate the contribution margin per unit. The contribution margin ratio is given as 25%, and we know that the variable cost per unit is $36. The selling price per unit (P) can be calculated using the formula:
P = Variable cost per unit / (1 - Contribution margin ratio) P = 48
So, the selling price per unit is $48.
The contribution margin per unit is the selling price per unit minus the variable cost per unit. So,
Contribution margin per unit = P - Variable cost per unit Contribution margin per unit = 36 = $12
Now, we can calculate the breakeven point in units by dividing the fixed costs by the contribution margin per unit:
Breakeven point in units = Fixed costs / Contribution margin per unit Breakeven point in units = 12 = 1,500 units
So, the weekly breakeven point, in units, is 1,500 units. Therefore, the answer is (a) 1,500.
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