Question

 

Geraldo Inc. sells several products. Information of average revenue and costs is as follows:

Selling price per unit	$30.00
Variable costs per unit:
Direct material	$4.13
Direct manufacturing labour	$1.50
Manufacturing overhead	$1.46
Selling costs	$1.85
Annual fixed costs	$110,000

1. The Geraldo Inc. contribution margin ratio is
   1. 33.13%
   2. 42.51%
   3. 29.82%
   4. 63.70%
   5. 70.20%

 

2. The Geraldo Inc. break-even point in sales dollars is
   1. $156,693.
   2. $156,696.
   3. $156,695.1.
   4. $156,720.
   5. $156,690.

 

3. The Geraldo Inc. break-even point in units is
   1. 5,223 units.
   2. 5,224 units.
   3. 5,223.17 units.
   4. 5,223.2 units.
   5. 5,223.1 units.

Answer 1

Total variable cost per unit = direct materiial + direct labour + manufacturing overhead + selling expenses

Total variable cost per unit = 4.13 + 1.50 + 1.46 + 1.85

Total variable cost per unit = $8.94

Selling price per unit = $30

Contribution per unit = Selling price per unit - variable cost per unit

Contribution per unit = $30 - $8.94

Contribution per unit = $21.06

Contribution margin = contributionn per unit / Selling price per unit

Contribution margin = 21.06 / 30

Contribution margin = 70.20%

Therefore option (e) is correct.

Break-even point in sales dollars = Annual fixed cost / contribution margin

Break-even point in sales dollars = 110,000 / 70.20%

Break-even point in sales dollars = $156,695.16

Therefore option (c) is correct.

Break-even point in units = Annual fixed cost / contribution margin

Break-even point in units = 110,000 / 21.06

Break-even point in units = 5223.17 units

Therefore option (c) is correct.