Question

000 Requirements $ 1. Fill in the blanks for each missing value. (Round the contribution margin per unit to the nearest cent.) $ 2. Which company has the lowest breakeven point in sales dollars? 3. What causes the low breakeven point? Print Done

Answer 1

1. Filling in the blanks

		Blue ($)
a	Net sales revenue	26,25,000
b	Variable cost	21,00,000*
c	Fixed cost	180,200**
d	Operating Income	344,800
e	Units sold	175,000
f	Contribution per unit	3.00
g	Contribution margin ratio	20%***

Contribution = units sold × contribution per unit

= 175,000 × 3 = $ 525,000

* Variable cost = National sales revenue - Contribution

= 26,25,000-525,000 = $ 21,00,000

** Fixed cost = Contribution - Operating income

= 525,000 - 344,800 = $ 180,200

*** Contribution margin ratio = Contribution/Sales

= 525,000/26,25,000 = 20%

2. Lowest break even point in dollars (In $)

	Blue	Red	Green	Yellow
Fixed cost (FC)	180,200	208,000	228,000	260,000
Contribution margin ratio (CMR)	20%	80%	40%	30%
Break even point in dollars (FC/CMR)	901,000	260,000	570,000	866,667

Red has lower Break even point in dollars

3. Reason: Reason for low break even point in dollars is higher contribution margin ratio that is because lower variable cost leads to lower break even point in dollars.