Question

You are looking at a business’s numbers and you see that the contribution rate is 78%, selling price is $50, and the break-even volume is 2980. What is the fixed cost of this business?

How many items should they sell to earn a $5000.00 profit?

Answer 1

Contribution margin per unit = 0.78 $ 50 = $ 39

Break even sales dollar = Break even volume selling price = 2980 $ 50

Break even sales dollar = $ 149,000

Fixed cost of this business = $ 116,220

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Profit = Revenue - cost

$ 5000 = $ 50 Number of items sold - [ Fixed expenses + Variable expenses ]

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

$ 39 = $ 50 - variable cost per unit

Variable cost per unit = $ 11

$ 5000 = $ 50 Number of items sold - [ $ 116,220 + $ 11 Number of items sold ]

$ 5000 = $ 50 Number of items sold - $ 116,220 - $ 11 Number of items sold

Number of items sold 3108 units