If the selling price per unit is $65, total fixed expenses are $96,000, and the breakeven sales in dollars is $320,000, what will the variable expense per unit be?

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Quizplus · Accepted Answer

The variable expense per unit can be calculated using the formula for breakeven sales in dollars: Breakeven Sales = (Selling Price per Unit - Variable Expense per Unit) * Number of Units + Fixed Expenses. Rearranging to solve for the variable expense per unit gives us Variable Expense per Unit = Selling Price per Unit - (Breakeven Sales - Fixed Expenses) / Number of Units. Given that Breakeven Sales = $320,000, Fixed Expenses = $96,000, and Selling Price per Unit = $65, we first find the number of units at breakeven by dividing the breakeven sales by the selling price per unit: $320,000 / $65 = 4923 units (approximately). Then, Variable Expense per Unit = $65 - ($320,000 - $96,000) / 4923 = $65 - $45.50 = $19.50. However, the calculation for the number of units was incorrect; it should directly use the given values without calculating units. Correctly, Variable Expense per Unit = Selling Price per Unit - (Breakeven Sales - Fixed Expenses) / (Breakeven Sales / Selling Price per Unit), which simplifies to $65 - ($320,000 - $96,000) / ($320,000 / $65) = $65 - $224,000 / 4923 ≈ $65 - $45.50 = $19.50, indicating a misunderstanding in the explanation process. The correct approach is to understand that the contribution margin per unit is the difference between the selling price per unit and the variable cost per unit. Since the breakeven point in units is not directly given, we focus on the relationship between total sales at breakeven, total fixed costs, and the contribution margin. The correct calculation involves understanding that the total contribution margin at breakeven covers total fixed costs. Therefore, without needing to calculate the exact number of units, we can deduce that the variable cost per unit affects the contribution margin, which in turn affects the breakeven point. The mistake in the explanation was in the unnecessary and incorrect calculation of the number of units and the misinterpretation of the formula. The correct answer is found by recognizing that the variable expense per unit directly influences the breakeven sales amount through its impact on the unit contribution margin.

If the Selling Price Per Unit Is $65, Total Fixed