Contribution Margin and Break-even Point

Question 1:

Given the following information: determine;

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Selling Price

$17

Fixed Expenses

Selling & Administrative

$130,000

Interest Expense

$10,000

Variable Expenses

Cost of goods Sold

$4

Selling and Administrative

$3

  • What is the company’s contribution margin?
  • What is the break-even points in units?
  • If the company wants to earn a profit of $42,000 instead of breaking even, what is the number of units the company must sell?
  • Why is it important to understand the importance of break-even analysis in a business?