Benson Corporation sells products for $34 each that have variable costs of $9 per unit. Benson’s annual fixed cost is $5...

Question

Question

Benson Corporation sells products for $34 each that have variable costs of $9 per unit. Benson’s annual fixed cost is $590,000.

Required
Use the per-unit contribution margin approach to determine the break-even point in units and dollars.

Answer 1

Answer #1

Selling price per unit = $34

Less: variable cost per unit = $9

Contribution Margin per unit = $25

Contribution Margin ratio = Contribution Margin per unit / Selling price per unit

Contribution Margin ratio = $25 / $34

Break even point in units = Fixed cost / Contribution Margin per unit

Break even point in units = $590,000 / $25

Break even point in units = 23,600 units

Break even point in dollars = Fixed cost / Contribution margin ratio

Break even point in dollars = Fixed cost / (Contribution Margin per unit / Selling price per unit)

Break even point in dollars = $590,000 / ($25 / $34)

Break even point in dollars = $802,400

Break even point in units = 23,600 units

Break even point in dollars = $802,400

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Answer 2

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