Question

Pharoah Company has the following information available for September 2020.

Unit selling price of video game consoles		$450
Unit variable costs		$315
Total fixed costs		$47,250
Units sold		600

Compute the unit contribution margin.

Prepare a CVP income statement that shows both total and per unit amounts.

PHAROAH COMPANY
CVP Income Statement
For the Month Ended September 30, 2020

Compute Pharoah’ break-even point in units.

Prepare a CVP income statement for the break-even point that shows both total and per unit amounts.

PHAROAH COMPANY
CVP Income Statement
For the Month Ended September 30, 2020

Answer 1

Unit selling price of video game consoles		$450
Unit variable costs		$315
Total fixed costs		$47,250
Units sold		600
Unit Contribution Margin = Unit Selling price - Unit variable costs = 450-315 = $135
CVP Income Statement
	Total	Per Unit
Sales Revenue	$270,000	$450
Less: Variable costs	$189,000	$315
Contribution Margin	$81,000	$135
Less: Fixed costs	$47,250	$78.75
Operating Income	$33,750	$56

Break even point = Fixed costs/Contribution Margin per unit = 47.250/135 = 350 units
CVP Income Statement
	Total	Per Unit
Sales Revenue	$157,500	$450
Less: Variable costs	$110,250	$315
Contribution Margin	$47,250	$135
Less: Fixed costs	$47,250	$135.00
Operating Income	$0	$0