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In the month of March, Wildhorse Salon services 620 clients at an average price of $130. During the month, fixed costs were $16,380 and variable costs were 70% of sales
(a) Determine the total contribution margin in dollars, the per unit contribution margin, and the contribution margin ratio Contribution margin in dollars 5 Contribution margin per unit $ Contribution margin ratio %

Sagot :

Answer:

a) We have:

Total contribution margin in dollars = $24,180

Per unit contribution margin = $39

Contribution margin ratio = 30%

b) We have:

Break-even point in dollars = $54,600

Break-even point in in units = 420 units

Explanation:

Note: This question is not complete as its part b is missing. The part b of the question is therefore provided to complete it before answering it as follows:

b) Using the contribution margin technique, compute the break-even point in dollars and in units.

The explanation of the answer is now provided as follows:

a) Determine the total contribution margin in dollars, the per unit contribution margin, and the contribution margin ratio

Average price = $130

Variable costs = Average price * 70% = $130 * 70% = $91

Total sales = Number of clients * Average price = 620 * $130 = $80,600

Total variable cost = Total sales * 70% = $80,600 * 70% = $56,420

Therefore, we have:

Total contribution margin in dollars = Total sales - Total variable cost = $80,600 - $56,420 = $24,180

Per unit contribution margin = Average price - Variable costs = $130 - $91 = $39

Contribution margin ratio = (Total contribution margin in dollars / Total sales) * 100 = ($24,180 / $80,600) * 100 = 30%

b) Using the contribution margin technique, compute the break-even point in dollars and in units.

Break-even point in dollars = Fixed cost / Contribution margin ratio = $16,380 / 30% = $54,600

Break-even point in in units = Fixed cost / Per unit contribution margin = $16,380 / $39 = 420 units

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