If the sales price per unit is $89, total fixed expenses are $456,000, and the breakeven sales in dollars is $760,000, what is the variable cost per unit?
A) $17.80
B) $35.60
C) $44.50
D) $3.42

Question

Quizplus · Accepted Answer

The variable cost per unit can be found by first determining the contribution margin per unit, which is the sales price per unit minus the variable cost per unit. The breakeven point in dollars ($760,000) equals the total fixed expenses ($456,000) divided by the contribution margin ratio. The contribution margin ratio is the contribution margin per unit divided by the sales price per unit. Rearranging the formula to solve for the variable cost per unit, we find that the sales price per unit is $89. Since we don't have the exact number of units to calculate the contribution margin ratio directly, we use the given information to find the variable cost per unit indirectly. Given the total fixed expenses and the breakeven sales in dollars, we can calculate the total contribution margin at the breakeven point, which is $760,000 - $456,000 = $304,000. Assuming all units sold contribute equally, the contribution margin per unit is the difference between the sales price per unit and the variable cost per unit. Without the exact number of units, we directly calculate the variable cost per unit by understanding that at breakeven, the formula rearranges to $89 - Variable Cost per Unit = $304,000 / ($760,000 / $89). This calculation indirectly leads to finding the variable cost per unit, which matches one of the provided options when the correct calculations are applied.

If the Sales Price Per Unit Is $89, Total Fixed