Canton Company produces and sells toasters. The following unit cost information assumes a production and sales volume of 15,000 units:
Required:1) Compute the budgeted selling price per unit assuming Canton uses a cost-plus pricing strategy and a markup equal to 75% of production cost.2) Compute the firm's total fixed costs.3) Compute the firm's contribution margin per unit given the budgeted selling price you computed in Requirement 1.4) Compute the firm's breakeven point in units and dollars, using the selling price you calculated in part 1.
What will be an ideal response?
1) Budgeted selling price = ($9 + $6 + $2 + $3) + {($9 + $6 + $2 + $3) × 75%)} = $35
2) Total fixed costs at 15,000 unit volume: 15,000 × ($3 + $4) = $105,000
3) Contribution margin per unit = $35 - ($9 + $6 + $2 + $1) = $17
4) Break-even point in units = $105,000 ÷ $17 = 6,177 units (rounded)
Break-even point in dollars = 6,177 units × $35 = $216,195
5) Estimated profit when 15,000 units sold = (15,000 - 6,177) × $17 = $149,991
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