Question

Buffalo Company makes and sells shampoo. Each unit requires $1.40 labor costs, material costs per unit are $0.90 and other variable costs are $0.30. It sells shampoo for $4.45 to retailers. Fixed costs are $15,000. It sold 25,000 units in the current month. What is the Break-Even point in units? What is the Break-Even point in dollars? What is the contribution margin of Buffalo Company?

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To find the Break-Even point in units, we need to determine the number of units the company needs to sell in order to cover all its costs.

Step 1: Calculate the total variable cost per unit:

Labor costs per unit: $1.40

Material costs per unit: $0.90

Other variable costs per unit: $0.30

Total variable cost per unit = Labor costs + Material costs + Other variable costs = $1.40 + $0.90 + $0.30 = $2.60

Step 2: Calculate the contribution margin per unit:

Selling price per unit: $4.45

Contribution margin per unit = Selling price per unit - Total variable cost per unit = $4.45 - $2.60 = $1.85

Step 3: Calculate the Break-Even point in units:

Fixed cost = $15,000

Contribution margin per unit = $1.85

Break-Even point in units = Fixed cost / Contribution margin per unit = $15,000 / $1.85

Answer: The Break-Even point in units is approximately 8,108 units.

To find the Break-Even point in dollars, we need to multiply the Break-Even point in units by the selling price per unit.

Break-Even point in dollars = Break-Even point in units * Selling price per unit = 8,108 units * $4.45

Answer: The Break-Even point in dollars is approximately $36,135.40.

To find the contribution margin of Buffalo Company, we need to calculate the contribution margin ratio.

Contribution margin ratio = Contribution margin per unit / Selling price per unit = $1.85 / $4.45

Answer: The contribution margin of Buffalo Company is approximately 41.57%.

Step 1: Calculate the total variable cost per unit:

Labor costs per unit: $1.40

Material costs per unit: $0.90

Other variable costs per unit: $0.30

Total variable cost per unit = Labor costs + Material costs + Other variable costs = $1.40 + $0.90 + $0.30 = $2.60

Step 2: Calculate the contribution margin per unit:

Selling price per unit: $4.45

Contribution margin per unit = Selling price per unit - Total variable cost per unit = $4.45 - $2.60 = $1.85

Step 3: Calculate the Break-Even point in units:

Fixed cost = $15,000

Contribution margin per unit = $1.85

Break-Even point in units = Fixed cost / Contribution margin per unit = $15,000 / $1.85

Answer: The Break-Even point in units is approximately 8,108 units.

To find the Break-Even point in dollars, we need to multiply the Break-Even point in units by the selling price per unit.

Break-Even point in dollars = Break-Even point in units * Selling price per unit = 8,108 units * $4.45

Answer: The Break-Even point in dollars is approximately $36,135.40.

To find the contribution margin of Buffalo Company, we need to calculate the contribution margin ratio.

Contribution margin ratio = Contribution margin per unit / Selling price per unit = $1.85 / $4.45

Answer: The contribution margin of Buffalo Company is approximately 41.57%.

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