Marketing and Accounting been stuck on this question all day please help!

Question

The Superior Jumpdrive Company sells jump drives for $10 each. Manufacturing cost is $2.60 per jump drive; marketing costs are $2.40 per jump drive; and royalty payments are 20% of the selling price. The fixed costs of preparing the jump drive is $18 000. Capacity is 15 000 jump drives.

1. Compute the contribution margin
2. Compute the contribution rate
3. Compute the break-even point in units
4. Compute the break-even point in dollars
5. Compute the break-even point (in units) as a percentage of capacity
6. Determine the break-even point in units if fixed costs are increased by $1600, while manufacturing cost is reduced by $0.50 per jump drive.
7. Determine the break-even point in units if the selling price is increased by 10%, while fixed costs are increased by $2900.

Answer 1

Hello,

The answer to the listed questions are based off of a few definitions/formulas.

Contribution margin is (Revenue - Variable costs)

Contribution Rate (assuming you mean contribution margin ratio) is (Contribution Margin/Revenue)

The break even point is the point in either sales $ or units where your costs equal or offset your expenses so you "break even"

For #1 the contributions margin is ($10 sales price - ($2.40+$2.60+$2 = $7 total per unit variable cost))

Contribution Margin = $3/unit

For #2 the contribution ratio is ($3 contribution margin/ $10 sales price)= 30% contribution ration

For #3 The break even point is where the profit gained from the sale of each unit offsets the fixed cost.

($18000 fixed cost/ $3 per unit profit)= 6000 unit breakeven

For #4 the breakeven in dollars is (6000 unit breakeven * $10 price per unit)= breakeven revenue of $60000

For #5 the breakeven sales units is 6000 which is (6000/15000= 40% of capacity)

breakeven occurs once 40% of capacity is reached.

For #6 and #7 just redo #1-#5 with the new assumptions listed in the problems.