If the breakeven point is 120 units and fixed costs are $62000, the contribution margin per unit is __________?
Show answer Hide answer
Answer: C. $516.67
Explanation
The contribution margin per unit is calculated by dividing fixed costs by break-even units. Dividing sixty-two thousand dollars of fixed costs by one hundred twenty break-even units. This division calculation results in a unit contribution margin of five hundred sixteen dollars. The break-even point is where total revenues exactly equal total fixed and variable costs. Dividing fixed costs by the break-even unit volume isolates the required unit contribution. Financial analysts use break-even formulas to evaluate business risk and profitability.
Entrepreneurs calculate break-even points to determine minimum sales required to avoid losses. Pricing managers use contribution margins to ensure products cover fixed overhead expenses. Understanding break-even dynamics helps firms make informed decisions about expanding capacity. Option A results from multiplying fixed costs by the break-even units incorrectly. Option B represents a massive calculation error with an excessively large monetary figure. Option D incorrectly labels the total fixed cost amount as the unit contribution margin.
- Subject
- Accounting and Finance
- Category
- Accounting
- Topic
- —
- Difficulty
- medium
Related questions
Q1. Reviewing historical performance, evaluating alternatives, and planning for the future is called __________?
Show answer Hide answer
Answer: A. learning
Learning involves reviewing historical performance, evaluating alternatives, and planning for the future. Organizations learn by analyzing past successes and failures to improve upcoming strategic plans. This continuous...
Q2. If the machine overhead cost is $500000 for 1000 hours, the cost allocation rate is ____________?
Show answer Hide answer
Answer: C. $500 per machine hour
The cost allocation rate is found by dividing total overhead costs by total hours. Dividing five hundred thousand dollars of machine overhead by one thousand machine hours. This division calculation produces the exact co...
Q3. Given a target operating income of $45000 and a unit contribution margin of $500, the volume of units to be sold is __________?
Show answer Hide answer
Answer: B. 90 units
The volume of units required equals target operating income divided by contribution margin. Dividing forty-five thousand target operating income by five hundred unit margin. This division calculation yields a required sa...
Q4. If the actual labor rate paid is $1200 and the budgeted rate is $1000, the labor price variance is __________?
Show answer Hide answer
Answer: D. unfavorable
A labor price variance is unfavorable when the actual labor rate exceeds budgeted rates. The actual labor rate paid of twelve hundred exceeds the budgeted rate of one thousand. Paying higher labor rates than anticipated...
Q5. If allocated indirect costs are $1500 and actual indirect costs are $1200, this situation is termed __________?
Show answer Hide answer
Answer: D. over allocated indirect cost
When allocated indirect costs exceed actual costs, the difference is over-allocated. Allocated indirect costs of fifteen hundred exceed actual costs of twelve hundred dollars. This positive difference of three hundred do...
Q6. Given an actual variable quantity of 50, with actual and budgeted allocated overhead of $7550 and $4500 respectively, the variable overhead spending variance is __________?
Show answer Hide answer
Answer: B. $152,500
The variable overhead spending variance evaluates the difference between actual overhead incurred and budgeted overhead for the actual input quantity. Calculating this variance requires multiplying the actual input quant...