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Break-Even Units, Contribution Margin Ratio, Multiple-Product Breakeven, Margin of Safety, Degree of Operating Leverage

Jellico Inc.'s projected operating income (based on sales of 450,000 units) for the coming year is as follows:

	Total
Sales	$ 9,000,000
Total variable cost	5,310,000
Contribution margin	$ 3,690,000
Total fixed cost	2,476,400
Operating income	$ 1,213,600

Required:

1(a). Compute variable cost per unit. Enter your answer to the nearest cent.
$per unit

1(b). Compute contribution margin per unit. Enter your answer to the nearest cent.
$per unit

1(c). Compute contribution margin ratio.
%

1(d). Compute break-even point in units.
units

1(e). Compute break-even point in sales dollars.
$

2. How many units must be sold to earn operating income of $319,800?
units

3. Compute the additional operating income that Jellico would earn if sales were $50,000 more than expected.

Answer 1

Answer:-1)a:- Variable cost per unit= Total variable costs/Total units

=$5310000/450000 units =$11.80 per unit

1)b:- Contribution margin per unit= Contribution margin/Total units

=$3690000/450000 units =$8.20 per unit

1)c:- Contribution margin Ratio= (Contribution margin/Total Sales)*100

=($3690000/$9000000)*100 =41%

1)d:-BEP in units =Fixed costs/ Contribution margin per unit

=$2476400/$8.20 per unit =302000 units

1)e:- Break-even point in sales dollars= Fixed costs/ Contribution margin ratio

=$2476400/41% =$6040000

2) Units must be sold to earn operating income of $319,800=

=($2476400+$319800)/$8.20 per unit =341000 units

3)-The additional operating income =Additional sales* Contribution margin Ratio

=$50000*41% =$20500