question archive Berhannan’s Cellular sells phones for $100
Berhannan’s Cellular sells phones for $100
Subject:AccountingPrice:2.87 Bought7
Berhannan’s Cellular sells phones for $100. The unit variable cost per phone is $50 plus a selling commission of 10%. Fixed manufacturing costs total $1,250 per month, while fixed selling and administrative costs total $2,500.
A. What is the contribution margin per phone?
B What is the breakeven point in phones?
c. How many phones must be sold to earn a targeted profit of $7,500?
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Answer:
A) Contribution margin per phone = Selling price per unit - variable cost per unit = 100 - (50 + 10) = $40/phone
B) Break even point = Fixed costs/contribution margin per phone = (1250+2500)/40=3750/40 = 93.75 = 94 phones
C) No of phones to earn the target profit = (fixed cost + target profit)/contribution per phone
= (3750+7500)/40 = 11250/40 = 281.25 = 282 phones
