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a product has the following costs:
direct material-$15 , direct labour-$9, variable overheads-$16, fixed overheads are $9000 per month. Budgeted sales per month are 450 units to allow the product to break even.
what is the mark up which needs to be added to marginal cost to allow the product to break even at budgeted units ?
Solution : 50%
Working was not clear but please correct me in my own calculations:
Marginal costs = $40
Contribution per unit = $20 ( $9000/450)
To break even total contribution will be $20*450=$ 9000 which is equal to the fixed costs of $9000.
Selling price per unit = $60 ($20+$40)
% margin = 50% (20/40 )
Please , it’s just my logic having spy the answer as I could not understood how % margin was formed.
Could you correct me if my logic is wrong on % figure ? ( using contribution / variable cost
From what you have typed, your calculations are correct 🙂