Question

PA6-1 Calculating Contribution Margin, Contribution Margin Ratio, Break-Even Point [LO 6-1, 6-2] Hermosa, Inc., produces one model of mountain bike. Partial information for the company follows: 540 780 900 $ 135,000 $ ? $ ? Number of bikes produced and sold Total costs Variable costs Fixed costs per year Total costs Cost per unit Variable cost per unit Fixed cost per unit Total cost per unit $ 538.75 Required: 1. Complete the table. (Round your "Cost per Unit" answers to 2 decimal places.) Number of bikes produced and sold 540 Units 780 Units 900 Units Total costs Variable costs $ 135,000 Fixed costs per year Total costs $ 135,000 $ 0 $ Cost per unit Variable cost per unit Fixed cost per unit Total cost per unit 0.00 $ 538.75 $ 0.00

Answer 1

1) Complete table

Number of bikes produced and sold	540	780	900
Total Cost
Variable cost	135000	195000	225000
Fixed cost per year	225225	225225	225225
Total cost	360225	420225	450225
Cost per unit
Variable cost	250	250	250
Fixed cost	417.08	288.75	250.25
Total cost per unit	667.08	538.75	500.25

Calculate following

	540	780	900
Contribution margin ratio	(790-250/790) =68.35%	68.35%	68.35%
Total Contribution margin	540*540 = 291600	540*780 = 421200	540*900 = 486000

4) Break even unit = 225225/540 = 417 Units

Break even sales = 417*790 = $329430