Calculating CM, break even sales and operating profits
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Howard Beal co. manufactures molds for casting aluminum alloy test samples. Fixed costs amount to $20,000 per year. Variable costs for each unit manufactured are $16. Sales price per unit is $28.
a. What is the contribution margin of the product?
b. Calculate the break-even point in unit sales and dollars.
c. What is the operating profit (loss) if the company manufactures and sells:
(i) 1,500 units per year?
(ii) 3,000 units per year?
d. Plot a break-even chart using the foregoing figures.
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Solution Summary
Solution describes the steps to calculate contribution margin, break even sales and operating profit.
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Solution
a. What is the contribution margin of the product?
Contribution Margin=Sales Price-Variable Cost
Sale Price=$28.00
Variable Cost=$16.00
Contribution Margin=$12.00
b. Calculate the break even point in unit sales and dollars
Break even Sales in units=Fixed Costs/Contribution Margin
Fixed ...
Education
- BEng (Hons) , Birla Institute of Technology and Science, India
- MSc (Hons) , Birla Institute of Technology and Science, India
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