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.
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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