Sweet Manufacturing is planning to sell 400,000 hammers for $3 per unit.The contribution margin ratio is 20%.If Sweet will break even at this level of sales, what are the fixed costs?

Question

Quizplus · Accepted Answer

The contribution margin per unit is $3 * 20% = $0.60. At break-even, total contribution margin equals fixed costs. Therefore, fixed costs = 400,000 units * $0.60 = $240,000.

Sweet Manufacturing Is Planning to Sell 400,000 Hammers for $3