question archive Forrester Company is considering buying new equipment that would increase monthly fixed costs from $360,000 to $445,500 and would decrease the current variable costs of $60 by $15 per unit
Forrester Company is considering buying new equipment that would increase monthly fixed costs from $360,000 to $445,500 and would decrease the current variable costs of $60 by $15 per unit
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Forrester Company is considering buying new equipment that would increase monthly fixed costs from $360,000 to $445,500 and would decrease the current variable costs of $60 by $15 per unit. The selling price of $100 is not expected to change Forrester's current break-even sales are $900,000 and current break-even units are 9,000. If Forrester purchases this new equipment, the revised contribution margin ratio would be.
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Answer:
Calculation of revised contribution margin -
contribution margin ratio = (sales price per unit - variable cost per unit )/ sales price per unit
selling price per unit = $ 100
old variable cost per unit = 60
revised variable cost per unit = 60 - 15
= $ 45
so revised contribution margin ratio = (100-45)/100
= 55/100
= 55%
