Question

A proposed project has fixed costs of $39,480, depreciation expense of $8,724, and a sales quantity of 1,330 units. The total variable costs are $5,607. What is the contribution margin per unit of the projected level of sales is the accounting break-even point?

Answer 1

Answer:

the contribution margin per unit of the product is $29.7

Explanation:

to calculate fixed cost per unit, you will divide the total fixed cost by the number of unit of product. i.e $39,480/1330units = $29.7 per unit

variable cost per product is $5,607/1330units = $4.2 per unit

selling price = 33.9 i.e fixed cost + variable cost

solution

selling price per unit=           33.9

less V.C                                   4.2

contribution  margin               29.7

  fixed cost per unit               29.7

                                     0

the account is at break-even point

Answer 2

Answer:

Approximately $29.68

Explanation:

First, determine the unit price of products.

In this case depreciation expense is a fixed cost, because it recurs in the same amount per period throughout the useful life of the project.

Total cost/Total products ($39450+$5607/1330)

= $33.9 (unit price per product)

Second, determine Contribution Margin (CM) =

Unit price of products - Total Variable cost per unit (TVC per unit)

where TVC per unit= Total Variable cost/ Total Products

CM= $33.9-$5607/1330 = $29.68 approximately.

To confirm BEP:

Fixed Cost/Contribution Margin

$38480/$29.68= $1330