Asked by Bipul TIWARI on Jun 26, 2024
Verified
Ribco Company Ltd makes and sells only one product. The unit contribution margin is $6, and the break-even point in unit sales is 24 000. What are the company's fixed expenses?
A) $400 000
B) $14 400
C) $40 000
D) $144 000
Fixed Expenses
Costs that do not change with the level of company activity or production volume, such as rent or salaries.
Unit Contribution Margin
The profit per unit sold, calculated by subtracting the variable cost per unit from the selling price per unit.
Break-Even Point
The level of production or sales at which total costs equal total revenue, meaning the business neither earns nor loses money.
- Evaluate the break-even points both in unit count and sales dollars.
- Analyze how alterations in fixed and variable costs influence the determination of break-even points and profit targets.
Verified Answer
MH
Madison HendrixJun 27, 2024
Final Answer :
D
Explanation :
We can use the formula for calculating the break-even point in unit sales:
Break-even point = Fixed expenses / Unit contribution margin
Substituting the given values,
24000 = Fixed expenses / 6
Fixed expenses = 24000 * 6
Fixed expenses = 144000
Therefore, the company's fixed expenses are $144 000.
Therefore, the answer is D.
Break-even point = Fixed expenses / Unit contribution margin
Substituting the given values,
24000 = Fixed expenses / 6
Fixed expenses = 24000 * 6
Fixed expenses = 144000
Therefore, the company's fixed expenses are $144 000.
Therefore, the answer is D.
Learning Objectives
- Evaluate the break-even points both in unit count and sales dollars.
- Analyze how alterations in fixed and variable costs influence the determination of break-even points and profit targets.