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Incline Company generated $1,400,000 in revenue selling 800 units of its only product. Each unit has a contribution margin of $280. The company has fixed costs of $125/unit at the current production volume (assume unit production volume equals unit sales volume).

a. What is the contribution margin ratio for Incline's product?

b. Calculate the break-even point in revenue for Incline?

Respuesta :

hyderali230

Answer:

a. 16%

b. $625,000

Explanation:

Contribution margin ration is the rate of contribution margin to the sales value of the given product.

Contribution margin = $280 per unit

Selling price = $140,000 / 800 = $1,750 per unit

Contribution margin ratio = Contribution margin / Sales = $280 / $1,750 = 0.16 = 16%

Break-even point is the level of sales at which the has no profit no loss situation. At this point the business has covered all the variable and fixed costs.

Break-even Point in revenue = Fixed cost /  Contribution margin ratio

Break-even Point in revenue = ( $125 x 800 ) / 16% = $100,000 / 16% = $625,000

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