The Rolling Creek Textile Mill produces denim. The fixed monthly cost is $21,000, and the variable cost per yard of denim is $0.45. The mill sells a yard of denim for $1.30. If the maximum operating capacity of the Rolling Creek Textile Mill described in problem 3 is 25,000 yards of denim per month, determine the break even volume as a percentage of capacity.
Contribution per yard = Price- variable cost
= 1.30- 0.45 =0.85
The solution shows calculations of break even volume as a percentage of capacity.