To determine how much the company is contributing to covering its fixed costs or generating profits, we first need to calculate the contribution margin per unit. The contribution margin is calculated as the selling price per unit minus the variable cost per unit.
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Calculate Contribution Margin per Unit:
\[ \text{Contribution Margin} = \text{Selling Price} - \text{Variable Cost} \]
\[ \text{Contribution Margin} = 200.00 - 125.00 = 75.00 \text{ per unit} \]
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Calculate Total Fixed Costs:
Fixed costs include rent and insurance.
\[ \text{Total Fixed Costs} = \text{Rent} + \text{Insurance} \]
\[ \text{Total Fixed Costs} = 2,515.00 + 1,331.00 = 3,846.00 \text{ per month} \]
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Determine the Contribution to Fixed Costs:
If you want to know how much the company contributes to its fixed costs with each unit sold, you can express it as follows:
\[ \text{Contribution to Fixed Costs per Unit} = \text{Contribution Margin per Unit} \]
\[ \text{Contribution to Fixed Costs per Unit} = 75.00 \text{ per unit} \]
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If needed, you can calculate the total contribution based on the number of units sold:
Let \( Q \) be the number of units sold.
\[ \text{Total Contribution} = Q \times \text{Contribution Margin} \]
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Break-even Analysis (optional):
To find out how many units the company needs to sell to break even (cover fixed costs):
\[ Q_{break-even} = \frac{\text{Total Fixed Costs}}{\text{Contribution Margin}} \]
\[ Q_{break-even} = \frac{3,846.00}{75.00} = 51.28 \]
Therefore, the company needs to sell approximately 52 units to cover all its fixed costs.
In summary, for each table sold, the company contributes $75.00 towards covering its fixed costs or generating profit.