Backus Inc. makes and sells many consumer products. The firm's average contribution margin ratio is 35%....

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Backus Inc. makes and sells many consumer products. The firms average contribution margin ratio is 35%. Management is consid

business accounting

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Answer 1

Answer #1

Backus Inc.

a) Contribution margin is 35%

Variable expense ratio = (1- Contribution margin)

= 1 - 35% = 65%

Selling price = Variable expense/ Variable expense ratio

= 7.8/65% = 12

Selling price is $ 12 per unit

b) units to be sold = (Fixed cost + Desired Profit) / Contribution margin per unit

= (15,000 + 6,000) / (12×35%)

= 21,000 / 4.20 = 5000 units

Number of units of new product are 5000 units.

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Answer 2

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Backus Inc. makes and sells many consumer products. The firm's average contribution margin ratio is 35%....

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