Question

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

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