Question

Blanchard Company manufactures a single product that sells for $110 per unit and whose total variable...

Blanchard Company manufactures a single product that sells for $110 per unit and whose total variable costs are $88 per unit. The company’s annual fixed costs are $308,000.

(1) Prepare a contribution margin income statement for Blanchard Company at the break-even point.

BLANCHARD COMPANY
Contribution Margin Income Statement (at Break-Even)
Amount Percentage of sales

Sales

Variable costs

Contribution margin

Fixed costs

Net income

Sales

Variable costs

Contribution margin

Fixed costs

Net income

%

Sales

Variable costs

Contribution margin

Fixed costs

%

Sales

Variable costs

Contribution margin

Fixed costs

Net income

Sales

Variable costs

Contribution margin

Fixed costs

Net income

$

(2) Assume the company’s fixed costs increase by $125,000. What amount of sales (in dollars) is needed to break even?

Break-Even Point in Dollars
Choose Numerator: / Choose Denominator: = Break-Even Point in Dollars

Contribution margin ratio

Fixed costs per unit

Selling price per unit

Total fixed costs

Variable costs per unit

/

Contribution margin ratio

Fixed costs per unit

Selling price per unit

Total fixed costs

Variable costs per unit

= Break-even point in dollars

Homework Answers

Answer #1
1
BLANCHARD COMPANY
Contribution Margin Income Statement (at Break-Even)
Amount Percentage of sales
Sales $1,540,000 100%
Variable costs $1,232,000 80%
Contribution margin 308,000 20%
Fixed costs 308,000
Net income 0
2
Break-even point in dollars
Choose Numerator: / Choose Denominator: = Break-even point in dollars
Total fixed costs / Contribution margin ratio = Break-even point in dollars
$433,000 / 20% = $2,165,000
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