Question

Swifty Corporation is planning to sell 200000 hammers for $8 per unit. The contribution margin ratio is 20%. If Swifty will break even at this level of sales, what are the fixed costs?

Answer 1

Answer:

$320,000

Explanation:

Given that,

Planning to sell hammers = 200,000

Selling price per unit = $8

contribution margin ratio = 20%

At break even, Fixed costs = Contribution margin

Therefore,

Contribution margin ratio:

= (Planning to sell hammers × Selling price per unit) × contribution margin ratio

= (200,000 × $8) × 20%

= $320,000

Thus,

Fixed costs = $320,000