Furrilo Furriers has a contribution margin ratio of 80 percent and must sell 12,000 stoles at a unit price of $400 to break even

Accounting Jan 20, 2021

Furrilo Furriers has a contribution margin ratio of 80 percent and must sell 12,000 stoles at a unit price of $400 to break even. a. Compute total fixed costs. b. Compute variable cost per unit.

Expert Solution

Contribution margin ratio = contribution /sales

Contribution = $400*.8 = $320 per unit

Break even point = fixed cost /contribution margin

(I) Fixed cost = contribution *Break even point

Fixed cost = $320*12000 = $3840000

(II) Variable cost = Sales - contribution

$400- $320 = $80 per unit

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