# Solve using the Contribution Margin approach. Valley Peat Ltd. sells peat moss for $10 per bag. Variable

## Question:

Solve using the Contribution Margin approach.

Valley Peat Ltd. sells peat moss for $10 per bag. Variable costs are $7.50 per bag and annual fixed costs are $100,000.

a. How many bags of peat must be sold in a year to break even?

b. What will be the net income for a year in which 60,000 bags of peat are sold?

c. How many bags must be sold for a net income of $60,000 in a year?

d. What annual sales in terms of bags and in terms of dollars would produce a loss of $10,000?

e. How much do the break-even unit sales and break-even revenue increase per $1000 increase in annual fixed costs?

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