Sometimes the selling price isn’t provided. In these cases, assume that the selling price is $1 per unit. So in the case of the question below from the quiz:
(Chapter 6 quiz Q4) Monk Foods has compiled these estimates for operations:
Sales 865,000
Fixed costs 252,100
Total variable cost 597,250
The margin is 865000 – 597250 = 267750. Now we calculate the margin per dollar of sales. Divide the margin by the total sales: 267750/865000 = 0.31. That means for every dollar in sales, we get to keep 31 cents to use to pay off the fixed costs. So how many units do we need to sell at $1 each to pay off the fixed costs of 252,100?
252,100/0.31 = 813,225.8. Now, in units we would want to round UP to 813,226. For amount of sales required to break even, leave the amount at 813,225.8.
See Example 6.18 on page 234 of the textbook.
No comments:
Post a Comment