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A company expected to sell 20000 units of a single product in a period at Sale price is $35 per unit. The fixed cost in the period are expected to total $245000.
What is the contribution to sale ratio is required to achieve Breakeven?To break even the company must earn a contribution of 245,000 so as to draw level with the fixed costs.
If 20,000 units are to be sold this means 245/20 = 12.25 contribution per unit.
SP per unit = 35
Contribution/unit = 12.25So, C/S ratio = 12.25/35 = 0.35, or 35%.
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