Solved: What is fashion headwears contribution margin ratio, Accounting Basics

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What is fashion headwears contribution margin ratio

Question:

Fashion Headwear, Ltd., operates a chain of exclusive ski hat boutiques in the western United States. The stores purchase several hat styles from a single distributor at $18 each. All other costs incurred by the company are fixed. Fashion Headwear, Ltd., sells the hats for $30 each.

Required

1. If fixed costs total $150,000 per year, what is the breakeven point in units? In sales dollars?

2. What is Fashion Headwear"s contribution margin ratio? Its variable cost ratio?

3. Assume that Fashion Headwear, Ltd., currently operates at a loss. What actions could managers take to lower the breakeven point and begin earning a profit?

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Accounting Basics: What is fashion headwears contribution margin ratio

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