Question

(TCO C) Magnolia Company's income statement for the most recent year appears below. Sales (45,000 units)...

(TCO C) Magnolia Company's income statement for the most recent year appears below.

Sales (45,000 units)

$1,350,000

Less: variable expenses

750,000

Contribution margin

600,000

Less: fixed expenses

375,000

Net operating income

$225,000



Required:
Calculate the unit contribution margin.
Calculate the the break-even point in dollars.
If the company desires a net operating income of $290,000, how many units must it sell?

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Answer #1

Unit Contribution margin = Contribution margin / Number of units

= 600,000 / 45,000

= 13.33

----------------------------

Contribution margin percentage = Contribution margin / Sales

= 600,000 / 1,350,000

= 44.44%

Breakeven point in dollars = Fixed expenses / Contribution margin percentage

= 375,000 / 44.44%

= 843,834

----------------------------

Contribution margin per unit = 13.33

Units to be sold = (Net operating income+Fixed expenses) / Contribution margin per unit

= (290,000+375,000) / 13.33

= 49,887

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