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Calculating Contribution Margin Per Unit

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1. Terrace Company manufactures and sells a single product that sells for $480 per unit; variable costs are $300. Annual fixed costs are $990,000. Current sales volume is $4,200,000. Compute the contribution margin per unit.

2. Terrace Company manufactures and sells a single product that sells for $480 per unit; variable costs are $300. Annual fixed costs are $990,000. Current sales volume is $4,200,000. Compute the contribution margin ratio.

3. Terrace Company manufactures and sells a single product that sells for $480 per unit; variable costs are $300. Annual fixed costs are $990,000. Current sales volume is $4,200,000. Compute the break-even point in units.

Solution Preview

1. Terrace Company manufactures and sells a single product that sells for $480 per unit; variable costs are $300. Annual fixed costs are $990,000. Current sales volume is $4,200,000. Compute the contribution margin per unit.

Selling price - variable costs = CM
480 - 300 = 180 per unit.

2. Terrace Company manufactures and sells a single ...

Solution Summary

This solution shows the student how to calculate the contribution margin, the contribution margin ratio and the break even units based on the fact patterns given. Additional resources are also provided for additional student understanding of the subject matter.

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