Question

A company sells Product X for $30 per unit. The Direct Material Cost, Direct labor cost, and Variable MFO costs total $21 per unit. Fixed costs to product the product are $135,000.

How many units of Product X must the company sell in order to break even?

What is the contribution margin ratio for product X?

How many units of Product X must be sold in order for the company to earn a $50,000 profit?

If the company was selling 25,000 units what would be its margin of safety in dollars?

If the company is selling 25,000 units, what would be the operating leverage?

If the company's sales of 25,000 units declinded by 20%, what would be the % decrease in its income from operations?

Answer #1

**Given,**

**selling price per unit = $30**

**total fixed cost = $1,35,000**

**direct material+direct labour+variable mfo per unit =
$21(total variable cost)**

**Therefore from the given information we can find
contribution per unit as follows**

**Contribution per unit = sale price per unit- variable
cost per unit**

**= $30-$21**

**= $9**

** **

**~Calculation of BREAKEVEN PIONT at this
level:**

**we know that ,BREAKEVEN PIONT(units) = FIXED COST ÷
CONTRIBUTION PER UNIT**

**= $1,35,000 ÷ $9**

**= 15,000 units**

**Therefore 15,000 units are required to be sold by the
company in order to be Breakeven.**

**~Calculation of contribution margin
ratio:**

**we know that Contribution ratio = contribution per unit
÷ sale price per unit ×100**

**= $9 ÷ $30 ×100**

**= 30%**

**~Calculation of sale units whe profit is
$50,000.**

**From Income statement we can derive that**

**Total Contribution = profit at that level + fixed
cost**

**= $50,000 + $1,35,000**

**= $1,85,000**

**As we arrived that contribution ratio is
30%**

**then total sales value at $50,000 profit =
$1,85,000÷30%**

**= $6,16,667**

**Therefore sale
units at $50,000 profit = $6,16,667 ÷ $30**

**= 20,555 units**

**~Calculation of Operating leverage when company
is selling 25,000 units:**

**we know that Operating leverage = contribution ÷
EBIT**

**• INCOME STATEMENT**

**sales (25,000 × $30) = $7,50,000**

**less: variable cost(25,000×$21) =
($5,25,000)**

**°Contribution = $2,25,000**

**less: fixed cost = ($1,35,000)**

**°EBIT/PROFIT = $90,000**

**Now Operating leverage = $2,25,000 ÷
$90,000**

**= 2.5 **

**~Calculation of percentage decrease in income when sale
units of 25,000 were declined by 20%**

**Therefore new sale units = 25,000-20%**

**= 20,000 units**

**•INCOME STATEMENT**

**Sales value (20,000 ×30) = $6,00,000**

**less:variable cost(20,000×21) = $4,20,000**

**°Contribution = $1, 80,000**

**less: fixed cost = $1,35,000**

**°EBIT/PROFIT = $45,000**

**here we can observe that profit at 25,000 units=
$90,000**

**Profit at 20,000 units = $45,000**

**percentage of decrease in income =( $90,000-$45,000)
÷90,000**

**= 50%**

Rush Company developed the following information for its
product: Per Unit Sales price $90 Variable cost $54 Contribution
margin $36 Total fixed costs $1,080,000 Instructions: Answer the
following independent questions and show computations using the
contribution margin technique to support your answers. (Partial
credit will be awarded if you show your work.)
How many units must be sold to break even?
What is the total sales that must be generated for the company
to earn a profit of $60,000?
If...

Hixson Company
manufactures and sells one product for $34 per unit. The company
maintains no beginning or ending inventories and its relevant range
of production is 20,000 units to 30,000 units. When Hixson produces
and sells 25,000 units, its unit costs are as follows:
Amount
Per Unit
Direct materials
$
8.00
Direct labor
$
5.00
Variable manufacturing overhead
$
1.00
Fixed manufacturing overhead
$
6.00
Fixed selling expense
$
3.50
Fixed administrative expense
$
2.50
Sales commissions
$
4.00
Variable...

Polk Company developed the following information for its
product:
Per unit
Sales price $90
Variable cost 63
Contribution margin $27
Total fixed costs $1,080,000
Instructions
Answer the following independent questions and show computations
using the contribution margin technique to support your
answers.
1. How many units must be sold to break even?
2. What is the total sales that must be generated for the company
to earn a profit of $60,000?
3. If the company is presently selling 45,000 units,...

A company sells 25,000 units for $60 each. Variable expenses per
unit are $35. Fixed expenses for the company are $220,000.
Provide the following information. Enter your answers in the
same order in which these appear.
Contribution margin per unit
Contribution margin ratio
Break-even in unit sales
Break-even in dollar sales
Margin of safety in dollars
Margin of safety percentage
Degree of operating leverage

A firm manufactures a product that sells for $12 per unit.
Variable cost per unit is $8 and fixed cost per month is $1200.
Capacity is 1000 units per month. a. How much is the contribution
margin? __________ b. How much is the contribution rate?
___________ c. How many units must they sell per month in order to
break even? _________ d. How many units must they sell in order to
have a profit of $2,500 per month? ___________

1) Bears Company sells a product for $15 per unit. The
variable cost is $10 per unit and fixed costs are $1,750,000.
Determine:
The Break-Even point in sales units
The Break-Even point if selling price were increased to
$655 per unit
2) Bear Company sells a product for $15 per unit. The
Variable cost is $10 per unit and fixed costs are $1,750,000.
Determine:
The Break-Even Point in sales units
The Sales units required for the company to achieve a...

Steven Company has fixed costs of $289,518. The unit selling
price, variable cost per unit, and contribution margin per unit for
the company's two products are provided below.
Product
Selling Price per Unit
Variable Cost per Unit
Contribution Margin per Unit
X
$848
$318
$530
Y
645
345
300
The sales mix for Products X and Y is 60% and 40%, respectively.
Determine the break-even point in units of X and Y. Round
answers to the nearest whole number.
units...

Information concerning a product produced by Ender Company
appears here:
Sales price per unit
$
174
Variable cost per unit
$
76
Total annual fixed manufacturing and operating costs
$
617,400
Required
Determine the following:
Contribution margin per unit.
Contribution margin ______ per unit
Number of units that Ender must sell to break even.
Break-Even in units ______
Sales level in units that Ender must reach to earn a profit of
$245,000.
Sales in units ______
Determine the margin of...

Jasmine Company had
the following amounts:
Direct materials $10 per unit
Direct Labor $27 per unit
Variable overhead $2.50 per unit
Fixed overhead $75,500
Variable selling expenses $4 per unit
Fixed selling and administrative expenses $125,000
65,000 units produced
57,000 units sold
Sales price per unit is $52 each
Calculate the VARIABLE
product cost per unit and prepare a Contribution Margin Income
Statement under Variable Costing in order to fill in the rest of
the information.
Variable
product cost per...

Lucent Manufacturing Company makes a product that it sells for
$67 per unit. The company incurs variable manufacturing costs of
$14 per unit. Variable selling expenses are $13 per unit, annual
fixed manufacturing costs are $186,000, and fixed selling and
administrative costs are $362,800 per year.
Contribution margin ratio
%
Break-even point in
dollars
Break-even point in units
LUCENT MANUFACTURING COMPANY
Contribution Margin Income Statement
Sales
Variable costs
Contribution margin
Fixed costs
Net income

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 8 minutes ago

asked 34 minutes ago

asked 47 minutes ago

asked 51 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago