Rundle Company produces a product that sells for $48 per unit and has a variable cost...
Rundle Company produces a product that sells for $48 per unit and has a variable cost of $27 per unit. Rundle incurs annual fixed costs of $138,600.
Required
-
Determine the sales volume in units and dollars required to break even. (Do not round intermediate calculations.)
-
Calculate the break-even point assuming fixed costs increase to $174,300. (Do not round intermediate calculations.)
Homework Answers
(A)
(1)
Contribution margin per unit = sales price per unit - variable cost per unit
= $48 - $27 = $21
Break even point (unit sales) = fixed expenses/contribution margin per unit
= $138600/$21
= 6600 units
(2)
Contribution margin ratio = contribution margin/sales
= $21/$48 = 43.75%
Break even point (dollar sales) = fixed expenses/contribution margin ratio
= $138600/43.75%
= $316800
(B)
(1)
Break even point (unit sales) = fixed expenses/contribution margin per unit
= $174300/$21
= 8300 units
(2)
Break even point (dollar sales) = fixed expenses/contribution margin ratio
= $174300/43.75%
= $398400
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