Accelerate Ltd has fixed costs of 72000 per annual It makes one product which it sells for 32 per unit Its contribution to sales ratio is 45 percent?

Answer 1

Break Even Point = ?
Variable Cost = ?


Sales price/ Unit = 32
Annual Fixed Cost = 72000


Contribution to sales Ratio = 45%
Contribution margin = 32 * 45% or 0.45
Contribution margin = 14.4

Contribution = Sales - Variable Cost

45% Of Sales = 100% - ?

SO

Variable Cost = 100% of sales - 45% of sales
Variable Cost = 55% of Sales price
Variable Cost = 32 * 55% or 0.55
Variable Cost = 17.6

Break even point = Fixed Cost/Contribution margin ratio

Breakeven Point = 72000 / 0.45 = $160000 or 160000/32 = 5000 Units


Working Notes:
Confirmation:

Sales (5000 * 32) 160000
Less: Variable Cost @ 55% 88000

Contribution margin 72000
Less: Fixed Cost 72000

Net Income(loss) NIL