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dxpayne dxpayne
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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.

Required:
a.   What is the contribution margin per phone?
b.   What is the break-even point in phones?
c.   How many phones must be sold to earn pre-tax income of $7,500?
Textbook 
Cost Accounting: A Managerial Emphasis, Canadian Edition

Cost Accounting: A Managerial Emphasis, Canadian Edition


Edition: 7th
Authors:
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GarretAGarretA
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More solutions for this book are available here
a.   CM per phone = $100 - $50 - 0.1($100) = $40

b.   N = Break-even in phones
   $100N - $50N - $10N - $1,250 - $2,500 = 0
   $40N - $3,750 = 0
   N = $3,750/$40 = 93.75 phones
   Break-even is 94 phones

c.   N = Phones to be sold
   $100N - $50N - $10N - $1,250 - $2,500 = $7,500
   $40N = $11,250
   N = $11,250/$40 = 281.25 phones
   282 phones must be sold
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