Question

# The condensed income statement for the Nancy and Paul partnership for 2022 is as follows. Nancy...

The condensed income statement for the Nancy and Paul partnership for 2022 is as follows.

Nancy and Paul Company
Income Statement
For the Year Ended December 31, 2020

Sales (244,800 units)

\$1,224,000

Cost of goods sold

816,000

Gross profit

408,000

Operating expenses

Selling

\$306,000

155,550
461,550

Net loss

\$(53,550 )

A cost behavior analysis indicates that 75% of the cost of goods sold are variable and 40% of the selling expenses are variable. Administrative expenses are \$94,350 fixed.

Compute the break-even point in total sales dollars for 2022. (Round intermediate calculations to 2 decimal places, e.g. 15.25 and final answers to 0 decimal places, e.g. 2,520.)

 Break-even point in dollars Break even in units

Calculation of fixed costs

Cost of goods sold (25%) =\$204,000

Selling expenses (60%) =\$183,600

Total fixed costs =\$481,950

Variable costs:

Cost of goods sold (75%) =\$612,000

Selling expenses (40%) =\$122,400

Total variable costs =\$795,600

Variable cost per unit =\$795,600/244,800=\$3.25

Selling price per unit =\$1,224,000/244,800 =\$5

Contribution margin per unit =\$5-\$3.25 =\$1.75

Contribution margin ratio=\$1.75/\$5 =35%

Break even point in dollars=Fixed cost / Contribution margin ratio=\$481,950/35% =\$1,377,000

Break even point in units = Fixed cost/ Contribution margin per unit

=\$481,950/\$1.75

=275,400 units.