COST ACCOUNTING
COST VOLUME PROFIT ANALYSIS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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The Furry Company plans to market a new product. Based on its market studies Furry estimates that it can sell 5, 500 units in 2022. The selling price will be RM2 per unit. Variable Costs are estimated to be 40% of the selling price. Fixed Costs are estimated to be P 6, 000. What is the break even point?
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3, 750 units
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5, 000 units
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500 units
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7, 500 units
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Explanation:
Detailed explanation-1: -The retailer’s contribution margin is: sales of $400, 000 minus variable costs of $280, 000 = $120, 000. The contribution margin as a percentage of sales is 30% ($120, 000/$400, 000).
Detailed explanation-2: -Contribution margin is $60, 000 + $45, 000 = $105, 000 = Sales × 30%.
Detailed explanation-3: -The contribution margin is sales minus variable costs (80, 000-20, 000) = 60, 000. Then, 60, 000/80, 000=75%.
Detailed explanation-4: -What Is Sales Revenue? Sales revenue equals the total units sold multiplied by the average price per unit.
There is 1 question to complete.