What are the monthly fixed costs?
Supplier sells a hose washer for $0.25 that it buys from the manufacturer for $0.12. Variable selling costs are $0.02 per hose washer. Break-even is currently at a sales volume of $10,600 per month. What are the monthly fixed costs associated with the washer?
Contribution Margin per unit = $0.25 – $0.12 – $0.02 = $0.11
sales volume of $10,600 per month = 42,400 units
B/E point in units = Fixed costs/CM per unit
42,400 units = FC/$0.11
So FC = 42,400 x $0.11 = $4,664
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