The Junior League of Yadkinville, California, collected recipes from members and published a cookbook entitled Food for Everyone. The book will sell for $18 per copy. The chairwoman of the cookbook development committee estimated that the club needed to sell 2,000 books to break even on its $4,000 investment. What is the variable cost per unit assumed in the Junior League’s analysis?
Answer:
Break-Even Sales (units) = Fixed CostsUnit Contribution MarginBreak-Even Sales (units) = $4,000$18 – $X= 2,000 unitsVariable cost per unit: $4,000 = 2,000 × ($18 – $X)Variable cost per unit: $4,0002,000 units= $18 – $XVariable cost per unit:Variable cost per unit:$2 = $18 – $X$16
