Question

Estrada Corporation produced 210,000 watches that it sold for $19 each during 2019. The company determined that fixed manufacturing cost per unit was $9 per watch. The company reported a $1,050,000 gross margin on its 2019 financial statements. Required Determine the variable cost per unit, the total variable cost, and the total contribution margin Variable cost per unit Total variable cost Total contribution margin

Answer 1

1.

variable cost per unit	$5
total variable cost	$1,050,000
total contribution margin (sale value - total variable cost ) (3,990,000-1,050,000)	$2,940,000

working:

sale value (210,000*19)	3,990,000
less: fixed manufacturing cost (210,000*$9)	(1,890,000)
less:gross margin	(1,050,000)
variable cost	$1,050,000
variable cost per unit ($1,050,000/ 210,000 units)	$5 per unit

2nd question:

break even point in units (	23,300 units
break even point in dollars	$792,200

working:

contribution per unit = sale price per unit - variable cost per unit

=>$34-12

=>$22 per unit

break even point in units = fixed costs / contribution per unit

=>$512,600 / $22

=>23,300 units.

break even point in dollars = 23,300 units *$34 sale price

=>$792,200.

3rd question:

sales in dollars	$420,000
sales in units	10,500 units

working:

contribution per unit =$40 sale price - $28 variable costs

=>$12 per unit

sales in units to get a profit of $49,000 = (fixed costs + target profit) / contribution per unit

=> ($49,000+77,000) / $12

=>10,500 units.

sales in dollars = 10.500 units*$40 per unit

=>$420,000.