Questions: Question 13 of 13 1.25 / 5 Felde Buchet Co, a manufacturer of rain barrels, had the following data for 2024 Sales quantity 2500 barrels Unit selling price 40 per barrel Unit variable costs 24 per barrel Fixed costs 149,500 (a) What is the contribution margin ratio? (b) What is the break-even point in sales dollars?

Question 13 of 13
1.25 / 5

Felde Buchet Co, a manufacturer of rain barrels, had the following data for 2024
Sales quantity
2500 barrels
Unit selling price
40 per barrel
Unit variable costs
24 per barrel
Fixed costs
149,500

(a) What is the contribution margin ratio?

(b) What is the break-even point in sales dollars?

Transcript text: Question 13 of 13 $1.25 / 5$ Felde Buchet Co, a manufacturer of rain barrels, had the following data for 2024 Sales quantity 2500 barrels Unit selling price $40 per barrel Unit variable costs $24 per barrel Fixed costs $149,500 (a) What is the contribution margin ratio? (b) What is the break-even point in sales dollars?

Solution

Solution Steps

Step 1: Calculate the contribution margin per unit

The contribution margin per unit is the difference between the selling price per unit and the variable cost per unit. In this case, it's $40 (selling price) - $24 (variable cost) = $16.

Step 2: Calculate the contribution margin ratio

The contribution margin ratio is the contribution margin per unit divided by the selling price per unit. So, $16 (contribution margin) / $40 (selling price) = 0.40 or 40%. This confirms the answer given for part (a).

Step 3: Calculate the break-even point in sales dollars

The break-even point in sales dollars is calculated as fixed costs divided by the contribution margin ratio. In this case, it's $19,500 (fixed costs) / 0.40 (contribution margin ratio) = $48,750.