Question

1) Given the following contribution format income statement, calculate break-even in units.

Sales (50,000 units)	$ 1,200,000
Variable expenses	550,000
Contribution margin	650,000
Fixed expenses	124,800
Net operating income	$        525,200

You must format your answers as follows: x,xxx

1a) Price and cost information relating to Marble, Ltd's only product is shown below:

Selling price per unit	$22.00
Variable expense per unit	$14.30
Fixed expense per month	$420,000

  

The break-even in sales dollars is _______.

You must enter your answer in the following format: $x,xxx

Answer 1

1)

Contribution margin per unit = Contribution margin / Units

= $650,000 / 50,000

= $13

Break-even units = Fixed expenses / Contribution margin per unit

= $124,800 / $13

= 9,600 units

1a)

Contribution margin per unit = Selling price per unit - Variable expense per unit

= $22 - $14.3

= $7.7

Contribution margin ratio = Contribution margin per unit / Selling price per unit

= $7.7 / $22

= 0.35

Break-even sales dollars = Fixed expenses / Contribution margin ratio

= $420,000 / 0.35

= $1,200,000