SBD Phone Company sells its waterproof phone case for $90 per unit. Fixed costs total $162,000, and variable costs are $36 per unit. Compute the units of product that must be sold to earn a pre-tax income of $200,000. (Round to the nearest whole unit.)
The business entity will sell 6,704 units to earn a pre-tax income of $200,000.
The number of units that a business entity must sell to achieve the situation of no-profit, no-loss is known as break-even units. It is calculated using the fixed cost and the contribution margin per unit.
A jeans maker is designing a new line of jeans called Slims. The jeans will sell for $205 per pair and cost $164 per pair in variable costs to make.
1. Compute the contribution margin per pair.
2. Compute the contribution margin ratio.
3. Describe what the contribution margin ratio reveals about this new jeans line.
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