Exercise 21-10 Contribution margin and break-even LO P2 Blanchard Company manufactures a single product that sells for $180 per unit and whose total variable costs are $135 per unit. The company’s annual fixed costs are $562,500.

Exercise 21-10 Contribution margin and break-even LO P2

Blanchard Company manufactures a single product that sells for $180 per unit and whose total variable costs are $135 per unit. The company’s annual fixed costs are $562,500. Explanation: (a) Contribution margin per unit = $180 – $135 = $45 per unit (b) Contribution margin ratio = $45 / $180 = 25% (c) Break-even point in units = $562,500 / $45 = 12,500 units (d) Break-even point in dollars = $562,500 / 25% = $2,250,000