Accepting Umberto’s order increases total contribution margin by €625. However, turning away regular orders loses total contribution margin of €3,000.
The number of kilograms to sell to break-even is:
A. 3,273
B. 3,600
C. 3,000
D. 2,300
E. none of the above
B. 3,600
Break-even quantity = Total Fixed Costs/Contribution margin per unit
= €36,000/€10 = 3,600 kgs
Contribution margin per unit = Price - (Dir Mat + Dir Lab + Var OH) - Sales commission
= €20 - (€4 + €2 + €3) - 5% × €20 = €10
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