The variable expense per unit is $35.60.
- Cost Per Unit = $89
- Total Fixed Expenses = $456,000
- Breakeven Sales = $760,000
- Variable Expense Per Unit = ?
To arrive to the answer, we should first work out on getting the value of the total variable expenses.
- Do this by using this formula: Total Variable Expenses = Breakeven Sales - Total Fixed Expenses
- Plug in the numbers: Total Variable Expenses = $760,000 - $456,000
- Total Variable Expenses = $304,000
Next, work on number of units sold to cover the "Breakeven Sales".
- Do this by dividing Breakeven Sales by Cost Per Unit
- Plug in the numbers: $760,000 / $89
- Breakeven Price per Unit - 8,539 units
You can now work on getting the amount of variable expense per unit.
- Do this by dividing the Total Variable Expenses by Breakeven Price per unit
- Plug in the numbers: $304,000 / 8,539 units
- Variable Expense per Unit = $35.60/unit
Fixed Cost - expenses that not change with an increase or decrease in the amount of goods or services produced.
Breakeven Price - the amount of money for which a product or service must be sold to cover the costs of manufacturing or providing it.
Unit Cost - cost incurred by a company to produce, store and sell one unit of a particular product; costs include all fixed costs all variable costs
Variable Cost - expenses that vary with production output; they rise as production increases and fall as production decreases.
Understanding accounting concepts is a crucial component of a successful small business. Visit BasicAccountingHelp.com to get examples and tips that will give you a solid foundation to build your accounting knowledge.