Bonita Industries is planning to sell 780000 units for $1.50 per unit. The contribution margin ratio is 20%. If Bonita will break even at this level of sales, what are the fixed costs

Fixed Costs234,000

Fixed costs at Break even point will be equal to Contribution value.

Explanation:

Bonita Industries is planning to sell 780,000 units for $1.50 per unit.

The contribution margin ratio is 20%. If Bonita will break even at this level of sales, what are the fixed costs

Sales 780, 000 x 1.50 = 1,170,000

Variable costs @ 80% =   936,000

Contribution @ 20% =      234,000

Fixed Costs234,000

Profit    NIL

The fixed costs for Bonita Industries are $234000

Explanation:

Break Even Point is when Bonita Industries neither makes a profit or a loss.

The Break Even Point in Units is Calculated as follows:

B.E.P=Fixed Costs/Contribution per unit

It is already given that  Bonita will break even at 780000

The Break Even Point in Revenue terms  is Calculated as follows:

B.E.P=Fixed Costs/contribution margin ratio

Break Even Point in Revenue terms is = $ 1170000 ($1.50×780000)

The Missing Figure is now the Fixed Cost which is calculated as

Tip : Make Fixed Costs the Subject of formula

Fixed Cost = Break Even Point in Revenue× contribution margin ratio

                   =$ 1170000×20%

                   =$234000

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