Question

In: Finance

1. If a company sells 450 units, each priced at $6 and costing the company $2.50...

1. If a company sells 450 units, each priced at $6 and costing the company $2.50 to manufacture, what is the unit gross profit? What is the total gross profit? What is the total gross margin?

2.

How many pair of shoes must you sell in order to break even?
- Sales price = $120; Variable cost= $50; Fixed = $40,000,000

Expert Solution

1)

Unit gross profit = Sales - Cost of manufacturing

= 6 - 2.50

= $3.50 per unit

Total gross profit

= 450*3.50

= $1,575

Total gross margin

Sales = 450*6 = 2,700

= Gross profit / Sales

= 1,575/2,700

= 58.33%

2)

Contribution margin = Selling price - Variable cost

= 120 - 50

= $70

Fixed cost = $40,000,000

Units to be sold for break even

= Fixed cost/ Contribution margin per unit

= 40,000,000/70

= 571,429 units approx.

jeff jeffy answered 2 years ago

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