Homework Answers
Calculation of Fixed cost:
(i) Step 1: Contribution margin per unit
| Contribution margin per unit = Net Operating Profit / Margin of safety in Units |
Contribution margin per unit = $6,575 / 263 Units = $25 per unit
(ii) Step 2: Break even point in units
| Break even point in units = Unit Sales - Margin of safety in units |
Break even point in units = 6,180 Units - 263 Units = 5,917 units
(iii) Fixed cost
| Fixed cost = Break even point in units * Contribution margin per unit |
Fixed cost = 5,917 Units * $25 per unit = $147,925
| Fixed cost = $147,925 |
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