Massey Company reported the following data regarding the product it sells: Sales price ........................... $25 Contribution margin
Question:
Sales price ........................... $25
Contribution margin ratio .......... 40%
Fixed costs ................................. $810,000
Required
Use the Contribution margin ratio approach and consider each requirement separately.
a. What is the break-even point in dollars? In units?
b. To obtain a profit of $270,000, what must the sales be in dollars? In units?
c. If the sales price increases to $30 and variable costs do not change, what is the new break-even point in dollars? In units?
Contribution Margin
Contribution margin is an important element of cost volume profit analysis that managers carry out to assess the maximum number of units that are required to be at the breakeven point. Contribution margin is the profit before fixed cost and taxes...
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Related Book For
Fundamental Managerial Accounting Concepts
ISBN: 978-1259569197
8th edition
Authors: Thomas Edmonds, Christopher Edmonds, Bor Yi Tsay, Philip Olds
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