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Hudson Co. reports the contribution margin income statement for 2019.

HUDSON CO.
Contribution Margin Income Statement
For Year Ended December 31, 2019
Sales (10,600 units at $300 each)	$	3,180,000
Variable costs (10,600 units at $240 each)		2,544,000
Contribution margin		636,000
Fixed costs		480,000
Pretax income	$	156,000

If the company raises its selling price to $320 per unit.

1. Compute Hudson Co.'s contribution margin per unit.
2. Compute Hudson Co.'s contribution margin ratio.
3. Compute Hudson Co.'s break-even point in units.
4. Compute Hudson Co.'s break-even point in sales dollars.

Answer 1

If the company raises its selling price to $320 per unit :-

1) Contribution margin per unit = Selling price - Variable cost = $320 - $240 = $80

2) Contribution margin ratio = Contribution margin per unit / Selling price = $80 / $320 = 25%

3) Breakeven point (In Units) =Total Fixed cost / Contribution margin per unit = $480,000 / $80 = 6,000 Units

4) Breakeven point (In Dollars) = Total Fixed cost / Contribution margin ratio = $480,000 / 25% = $1,920,000

Thank you,
Have a nice day,

Kiran G.