Question

Samsung’s managers rely on reports of variable costs. How can variable costing reports prepared using the contribution margin format help managers in computing break-even volume in units?

Short answer

Three values are needed for the computation of break even volume in units-Total fixed cost for the period, selling price per unit, and variable cost per unit.

As there are several items and that cannot be segregated into fixed and variable costs, alternative formula will be used that includes total cost and selling price. The total revenue and total cost is same at break even volume.

Step-by-step solution

Step 1:Computation of unit contribution margin-

$\mathbf{Contributionmarginperunit}\mathbf{=}\mathbf{Sellingpriceperunit}\mathbf{-}\mathbf{Variablecostperunit}$

Computation of break even point in units-

$\mathbf{Breakevenvolume}\left(\mathbf{units}\right)\mathbf{=}\frac{\mathbf{Totalfixedcost}}{\mathbf{Contributionmarginperunit}}$