Fiona found that she had broken even when she sold 120 boxes of her homemade chocolate chip cookies. The rent for her bakery (payable every month) was $300. The batter for the cookies cost $2 per box. She also used chocolate chips in her cookies. She sold each box for $5. How much did Fiona pay per box for her chocolate chips?

$0.5 per box

Explanation:

From CVP analysis,

The break-even point = Fixed cost/contribution margin per unit

For Fiona

Break-even point =$120 boxes, fixed costs = $300

Contribution margin per init = selling price - variable costs

selling price =$5: variable costs, cookies cost $2 per box, and chocolate chips

therefore

120 = $300/ Contribution margin per unit

$120 = $300/ CM

CM = $300/$120

CM = $2.5

Contribution margin = selling price - variable costs

$2.5 = $5- cookies - chocolate chips

$2.5 =$5 - $2- chocolate chips

$2.5 -$3-chocolate

chocolate chips = $3-$2.5

=$0.5 per box