Question

Cooper Company sells a product at $50 per unit that has unit variable costs of $20. The company's break-even sales point in sales dollars is $150,000. How much is the fixed costs now? (Hint: The fixed costs is same as the total contribution margin when there is break-even.) Select one: O a. $200,000 O b. $100,000 O c. $90,000 O d. $120,000

Answer 1

Solution : 1
	CALCULATION OF CONTRIBUTION MARGIN RATIO
	PARTICULARS	Product
	Selling Price Per Unit=	$                           50
	Less: Variable Cost	$                           20
	Contribution Margin per unit	$                           30
	Contribution Margin Ratio = $ 30 / $ 50=	60.00%
	CALCULATION OF FIXED COST
	Sales in Dollars	$               1,50,000
	Less: Variable Cost (40% of $ 150,000)	$                   60,000
	Contribution Margin	$                   90,000
	Fixed cost is the same of contribution margin of $ 90,000
	Answer = Option C = $ 90,000
Solution: 2
	Selling Price Per Unit=	$                             5
	Less: Variable Cost	$                             3
	Contribution Margin per unit	$                             2
	Contribution Margin Ratio ($ 2 / $ 5)	40%
	Target Production = ( Fixed Cost + target Income ) / Contribution Margin Ratio
	Target Production in units =
	Fixed Cost =	$                   30,000
	Add:	"+ "
	Target Income =	$                   20,000
	Equal to =	$                   50,000
	Divide By	"/"By
	Contribution marrgin Ratio	40%
	Equal to =	$               1,25,000
	Answer = Option A = $ 125,000