Sagnik B.

asked • 02/11/15

Tough Cost Accounting Question Need Help

Assume selling price per unit is $30, the contribution margin ratio is 40%, and the break even point is 5,000 units. What is total amount of fixed costs ?
 
a) 20,000 b) 30,000 c) 50,000 d) 60,000
 
please show help with steps.

Jeffrey G.

Well first to find break even point the formula is Fixed Cost / Contribution Margin = Break even Point
 
so you have two parts of the equation CM = .40 and Break even is price ($30 X 5000 units ) = $150,000
 
Problem is 
 
Fixed cost / .40 = 150,000
 
mulitply both sides of equation by .40
 
then .40 is cancelled out on the left side and  you have left
 
Fixed cost = 150000 x .4
 
Fixed Cost = 60000
 
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02/18/15

Sagnik B.

Thanks :) I will give you best answer but can you please look at my other open questions please
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02/18/15

Home I.

cm ratio = 40% i.e 40% of sales so cmpu = 40% of sppu cmpu = 40% of 30 = 12 bep in units = fc/cmpu or fc = bep in units x cmpu fc = 5000 x 12 fc = 60000
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02/03/24

1 Expert Answer

By:

Sam L H. answered • 10/07/15

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If the break even point is at 5000units and the price per unit is $30 then break even sales = 150,000.
Contribution margin is 40% applied to the sales number = $60,000
Break even means zero profits therefore Fixed cost must be 60,000
CM 40%    60,000
Fixed Cost 60,000
Net Income 00000 or break even
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