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Partner Industries sells a single product for $50 that has a variable cost of $40. Fixed costs amount to $5 per unit whe...

Partner Industries sells a single product for $50 that has a variable cost of $40. Fixed costs amount to $5 per unit when anticipated sales targets are met. If the company sells one unit in excess of its break-even volume, profit will be:

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Answer #1

Contribution per unit is the amount contributed towards fixed cost and profit for each unit sold

Contribution per unit

= Selling price per unit – Variable costs per unit

= $50 - $40

= $10 per unit

Fixed costs per unit is $5 when anticipated sales targets are met. In the present case, anticipated sales targets are the break even volume levels as after break even volume only profits will be earned as fixed costs will be fully recovered

So, after break even volume, each unit sold will contribute towards profit and so profit for one unit sold in excess of the anticipated volume will be $10 ( the contribution per unit)

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