Question

No Slip Co. produces sports socks. The company has fixed costs of$91,080andvariablecostsof$0.81 per package. Each package sells for $1.80.

Requirements

1. Compute the contribution margin per package and the contribution marginratio. (Round your answers to two decimal places.)

2. Find the breakeven point in units and in dollars using the contributionmargin approach.

Short answer

Answer

1. Contribution margin ratio is $0.99 and contribution margin ratio is 55%

2. Breakeven sales in units are 92,000 package and $165,600 in dollars.

Step-by-step solution

Calculation of contribution margin and contribution margin ratio

$

Sales price per unit 1.80

Variable cost per unit (0.81)

Contribution margin per unit 0.99

Contribution margin ratio (sales price per unit/contribution margin 55%

per unit x100)

Calculation of breakeven sales in dollars and units

$$\begin{gathered} \mathit{B}\mathit{r}\mathit{e}\mathit{a}\mathit{k}\mathit{e}\mathit{v}\mathit{e}\mathit{n}\mathbf{}\mathit{s}\mathit{a}\mathit{l}\mathit{e}\mathit{s}\mathbf{}\mathit{i}\mathit{n}\mathbf{}\mathit{u}\mathit{n}\mathit{i}\mathit{t}\mathit{s}\mathbf{=}\frac{\mathbf{F}\mathbf{i}\mathbf{x}\mathbf{e}\mathbf{d}\mathbf{}\mathbf{cos}\mathbf{t}}{\mathbf{C}\mathbf{o}\mathbf{n}\mathbf{t}\mathbf{r}\mathbf{i}\mathbf{b}\mathbf{u}\mathbf{t}\mathbf{i}\mathbf{o}\mathbf{n}\mathbf{}\mathbf{m}\mathbf{a}\mathbf{r}\mathbf{g}\mathbf{i}\mathbf{n}\mathbf{}\mathbf{p}\mathbf{e}\mathbf{r}\mathbf{}\mathbf{u}\mathbf{n}\mathbf{i}\mathbf{t}} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\frac{\mathbf{\$}\mathbf{91}\mathbf{,}\mathbf{080}\mathbf{+}\mathbf{\$}\mathbf{0}}{\mathbf{\$}\mathbf{0}\mathbf{.}\mathbf{99}} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{92}\mathbf{,}\mathbf{000}\mathbf{}\mathit{P}\mathit{a}\mathit{c}\mathit{k}\mathit{a}\mathit{g}\mathit{e} \\ \mathit{B}\mathit{r}\mathit{e}\mathit{a}\mathit{k}\mathit{e}\mathit{v}\mathit{e}\mathit{n}\mathbf{}\mathit{s}\mathit{a}\mathit{l}\mathit{e}\mathit{s}\mathbf{}\mathit{i}\mathit{n}\mathbf{}\mathit{d}\mathit{o}\mathit{l}\mathit{l}\mathit{a}\mathit{r}\mathit{s}\mathbf{=}\frac{\mathbf{Fixed}\mathbf{}\mathbf{cost}}{\mathbf{Contribution}\mathbf{}\mathbf{margin}\mathbf{}\mathbf{r}\mathbf{a}\mathbf{t}\mathbf{i}\mathbf{o}} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\frac{\mathbf{\$}\mathbf{91}\mathbf{,}\mathbf{080}}{\mathbf{55}\mathbf{\%}\mathbf{\%}} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{165}\mathbf{,}\mathbf{600}\mathbf{}\mathit{P}\mathit{a}\mathit{c}\mathit{k}\mathit{a}\mathit{g}\mathit{e} \end{gathered}$$