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Hudson Co. reports the contribution margin income statement for 2017. HUDSON CO. Contribution Margin Income Statement...

Hudson Co. reports the contribution margin income statement for 2017.

HUDSON CO.
Contribution Margin Income Statement
For Year Ended December 31, 2017
Sales (10,800 units at $280 each) $ 3,024,000
Variable costs (10,800 units at $210 each) 2,268,000
Contribution margin $ 756,000
Fixed costs 567,000
Pretax income $ 189,000

1. Compute Hudson Co.'s break-even point in units and.
2. Compute Hudson Co.'s break-even point in sales dollars.

3. Assume the company is considering investing in a new machine that will increase its fixed costs by $39,500 per year and decrease its variable costs by $9 per unit. Prepare a forecasted contribution margin income statement for 2018 assuming the company purchases this machine.

Homework Answers

Answer #1
Calculation of contribution margin per unit and contribution margin ratio
Particulars $
Selling price per unit 280
Variable cost per unit 210
Contribution margin per unit (280 - 210) 70
Contribution margin ratio (70/280)*100 25%
Compute Hudson Co.'s break-even point in units and.
Particulars
Fixed Costs 567000
Contribution margin per unit (280 - 210) 70
Break even point in units (567000/70) 8100
Compute Hudson Co.'s break-even point in sales dollars.
Fixed Costs 567000
Contribution margin ratio (70/280)*100 25%
Break even point in Sales Dollars (567000/25%) 2268000
forecasted contribution margin income statement for 2018
Particulars $
Sales (10800*280) 3024000
Variable cost (10800*201) 2170800
Contribution Margin (3024000 - 2170800) 853200
Less: Fixed Costs (567000+39500) 606500
Pretax Income (853200 - 606500) 246700
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