Calculating Contribution Margin, Contribution Margin Ratio, Break-Even Point
Overhill, Inc., produces one model of mountain bike. Partial information for the company follows:
Number of bikes produced and sold Total costs | 500 | 800 | 1,000 |
Variable costs | $125,000 | $ ? | $ ? |
Fixed costs per year | ? | ? | ? |
Total costs | ? | ? | ? |
Cost per unit |
|
|
|
Variable cost per unit | ? | ? | ? |
Fixed cost per unit | ? | ? | ? |
Total cost per unit | ? | $543.75 | ? |
Required:
1.Complete the table.
2.Calculate Overhill’s contribution margin ratio and its total contribution margin at each sales level indicated in the table assuming the company sells each bike for $650.
3.Consider the contribution margins just calculated and total fixed costs. Determine whether Overhill’s break-even point will be more or less than 500 units.
4.Calculate Overhill’s break-even point in units and sales dollars.
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