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A company manufactures and sell a single product with a variable cost per unit of $36. It has a contribution ratio of 25%. The company has weekly fixed cost of $ 18000.
Calculate the weekly breakeven point .I don’t know how to calculate the price.
thanksIf the CS ratio is 25%, then it means the contribution is 25% of the selling price.
Since the contribution is selling price less variable costs, the variable costs must be 75% of the selling price (giving the contribution as 100 – 75 = 25%).
If the variables costs are 75% of the selling price, and the variable costs are $36, then the selling price must be 36/75% = $48.
(And, of course, it checks. The contribution is 48 – 36 = $12, and $12 is 25% x $48 🙂 )
I think you made clerical mistake
as if the SP is $36 and 25% is contribution then VC should be $27
if the FC is $18000 than BEP should be 18000/9 = $2000
please correct me if i am wrong
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