Saira, Inc.is planning to sell 800,000 units for $1.50 per unit.The contribution margin ratio is 20%.If Saira will break even at this level of sales, what are the fixed costs?

Question

Quizplus · Accepted Answer

Fixed costs can be calculated using the formula: Fixed Costs = Total Sales - (Variable Costs + Fixed Costs). Given the contribution margin ratio (20%), we can find the total contribution margin (Total Sales * Contribution Margin Ratio) = 800,000 units * $1.50/unit * 20% = $240,000. Since Saira breaks even, the total contribution margin equals the fixed costs.