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# Hide or show questions Progress:10/29 items Calculator Break-Even Units, Contribution Margin Ratio, Multiple-Product Breakeven, Margin of...

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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)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

=\$50000*41% =\$20500