4. Laramie Company has variable cost ratio of 0.40. The fixed cost is $66,000 and 22,000...

4. Laramie Company has variable cost ratio of 0.40. The fixed cost is $66,000 and 22,000 units are sold at break-even. What is the price? What is the variable cost per unit? The contribution margin per unit? Note : Do NOT round interim computations. Round answers to the nearest cent.

Expert Solution

Answer :-

Price per unit = 5

Variable cost per unit = 2

Contribution margin per unit = 3

Contribution Per unit = (Fixed cost / Brekeven sales (units)

= (66,000/ 22,000)

= 3 per unit

Since we know Variable cost to sales ratio is 0.40, hence contribution to sales ratio will be 0.60 (100-0.40)
Hence, Sales Price per unit = (contribution per unit / .60)
= (3/0.60)
= 5 per unit

Variable cost = Sales Price * 0.40

= 5 *0.40

= 2 per unit

Following is the table to undestand ration if sales price is 1

	Sales Price	1	100%
less	Variable Cost	0.4	40%
	Contribution	0.6	60%

ekkarill92 answered 2 years ago

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