Penny Company sells 25,000 units at $59 per unit. Variable costs are $29 per unit, and...

Penny Company sells 25,000 units at $59 per unit. Variable costs are $29 per unit, and loss from operations is ($50,000). Determine the following: Round the contribution margin ratio to one decimal place.

a. Unit contribution margin	$	per unit
b. Contribution margin ratio		%
c. Fixed costs per unit at production of 25,000 units	$	per unit

Solutions

Expert Solution

Ans. a. Unit contribution margin per unit = (Sales price per unit-Variable cost per unit)

= (59-29) = $30 per unit

b. Contribution margin ratio = Contribution/Sales X100

= 30/59X100 = 50.85%

c. Calculation of Fixed per unit

Total Contribution for 25000 units (25000X30) = 750000

Less: Fixed Cost (Difference) = 800000*

Operation Loss = (50000)

Total Fixed is = $800000

Fixed cost per unit at production of 25000 units = 800000/25000 = 32 per unit

*Fixed cost calculation

Operation loss is 50000, it will come after deducting Fixed cost from Total contribution

Total contribution for 25000 units is = 750000

Operation loss is = 50000

Total fixed cost = 800000

Means Fixed cost is more than contribution thats why Operation loss is coming,

plz like it

ekkarill92 answered 10 months ago

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