Millar Company produces a single product which it sells for $89 a unit. If the fixed costs of manufacturing and selling the product are $68,400 a month and the variable costs are $57 a unit, which of the below are correct?

Question

Quizplus · Accepted Answer

To calculate the contribution margin per unit, we subtract the variable costs ($57) from the selling price ($89):
Contribution Margin per unit = Selling Price per unit - Variable Costs per unit
= $89 - $57
= $32

Option A is incorrect because fixed costs are not expressed on a per unit basis. 
Option B is incorrect because the break-even point is calculated by dividing the fixed costs by the contribution margin per unit, not the total sales volume. 
Option C is incorrect because fixed costs do not vary with changes in sales volume within a relevant range.

Millar Company Produces a Single Product Which It Sells for $89