The equation representing the total weekly costs (TC) in $ for an organization is as follows: TC= 525,000+35Q
Where Q represents the weekly production and sales in units. The organization’s contribution to sales ratio is 30%. What is the weekly breakeven point (in units)?
Total cost = Fixed cost + Variable cost per unit x Units And Contribution = Sales – Variable costs or Sales (100%) = Contribution + Variable costs. Since contribution to sales is 30%, contribution is 30% of sales. The Variable costs must then be 70% of sales. $35 is Variable cost per unit. And Variable costs = 70% of sales. Thus $35 = 70% and Sales (100%) = 35/70 x 100 = $50 per unit. Thus contribution is $15 per unit.