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4. Laramie Company has variable cost ratio of 0.45. The fixed cost is $96,250 and 25,000...

4. Laramie Company has variable cost ratio of 0.45. The fixed cost is $96,250 and 25,000 units are sold at break-even. What is the price? What is the variable cost per unit? The contribution margin per unit? Note : Do NOT round interim computations. Round answers to the nearest cent.

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Answer #1

Let x be the selling price per unit.

At break-even, Sales = Variable cost + Fixed cost

25,000x = 0.45(25,000x) + $96,250

25,000x - 0.45(25,000x) = $96,250

13,750x = $96,250, so

x = $7 per unit

Variable cost per unit = 0.45 x $7 = $3.15

Contribution margin per unit = $7 - $3.15 = $3.85

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