Happy Ten produces sports socks. The company has fixed expenses of $85,000 and variable expenses of...
Happy Ten produces sports socks. The company has fixed expenses of $85,000 and variable expenses of $0.85 per package. Each package sells for $1.70.
Begin by identifying the formula to compute the contribution margin per package. Then compute the contribution margin per package.
|
1. |
Compute the contribution margin per package and the contribution margin ratio. |
|
2. |
Find the breakeven point in units and in dollars. |
|
3. |
Find the number of packages Happy Ten needs to sell to earn
25,500 operating income. |
Homework Answers
|
Selling price per unit - Variable cost per unit = Contribution margin per unit = 1.70 - 0.85 = 0.85 Contribution margin per unit / Selling price per unit = Contribution margin ratio = 0.85/1.70 = 50% |
|
|
Fixed cost / Contribution margin per unit = Break even point in units 85,000/0.85 = 100,000 Fixed cost / Contribution margin ratio = Breakeven point in dollars = 85,000/50% = 170,000 |
|
|
(Fixed cost + Target profit)/Contribution margin per unit = Sales needed = (85,000+25,500)/0.85 = 130,000 |
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