Using Breakeven Analysis To Make Decision

Question 1

Contribution per Unit =

Answer 1

Selling price per unit - Variable cost per unit

Question 2

Total Contribution =

Answer 2

Total revenue - Total variable costs

Question 3

Calculate Contribution per Unit & Total Contribution:
Fixed costs: £750
Variable costs: £0.90
Selling price: £2.75
Number of customers: 700

Answer 3

Contribution per unit = £2.75 - £0.90 = £1.85

Total Contribution = (£2.75 x 700) - (£0.90 x 700)
= £1,925 - £630 = £1,295
or you could do £1.85 x 700 = £1,295