Question

Portia Company is a retailer of hammers. Portia pays $3.95 for each hammer and sells them for $8.35. Monthly fixed costs are $33,000. The hammer cost is the only variable cost. a. What is the contribution margin per unit? (Round your answer to 2 decimal places.) Contribution Margin per unit b. What is the break-even point in units? (Do not round intermediate calculations.) Break Even Point units c. How many units will Portia need to sell to earn target profit of $20.240? (Do not round Intermediate calculations.) Total Number of Units

Answer 1

Required a) Sales variable cost Contribution margin 8.35 (3.95) 4.40 $ Contribution margin $ 4.40 per unit Required b) Break even point (in unit) Fixed Cost Contribution margin per unit 33000 4.40 Break even point $ 7,500.00 units

Required c) Thus contribution margin ratio = 52.69% (4.40 /8.35) Add Fixed cost= desired income = Contribution margin $ $ $ 33,000 20,240 53,240 (52.69% of sales) 53,240 = 52.69% sales sales = 53240/52.69% = selling price pr units = total number of units = 101035/ 8.35 = $ $ $ 101,035 8.35 12,100 for your understanding less Sales (12100 x 8.35) variable cost ( 12100 x 3.95) Total Contribution margin Fixed cost Operating income $ $ $ $ $ 101,035 (47,795) 53,240 (33,000) 20,240 less Please comment if you have any doubt Please give thumps up if you are satisfied with the answer