Question

Blanchard Company manufactures a single product that sells for $100 per unit and whose total variable costs are $76 per unit. The company’s annual fixed costs are $338,400.

(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	$

(2) Assume the company’s fixed costs increase by $126,000. 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	=	Break-even point in dollars
		%

Answer 1

(1)

BLANCHARD COMPANY

Contribution Margin Income Statement (at Break-Even)

	Amount	Percentage of sales
Sales(14,100 * $100)	$1,410,000	100%
Variable costs(14,100 * $76)	$1,071,600	76%
Contribution margin	$338,400	24%
Fixed costs	$338,400
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
$338,400	/	24%	=	$1,410,000