Big Beef BBQ Ltd sells a single product, a gas barbecue. The barbecue sells for $960 per

Question:

Big Beef BBQ Ltd sells a single product, a gas barbecue. The barbecue sells for $960 per unit. Annual fixed costs are $1536000, and the contribution margin rate is 40%.

Required

A. What are the variable costs per unit?

B. How many units must the company sell to break even?

C. What is the break-even point in sales dollars?

D. If the company wants to earn a before-tax profit of $768 000, how many units must be sold? What sales dollar level is required? What is the company’s margin of safety at this sales level?

E. If the company wants to earn a before-tax profit of 20% of sales, how many units must be sold? What are the sales dollars?

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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