Question

Q1

Q1) Selling price per unit $21

VC per unit $13

Fixed Cost 57,000

Sales volume or units sold or sales in unit 21,000

1) Please calculate the Total Sales, Total VC, Total CM, and Net Income

2) If the sales volume increase by 15%, please calculate the new income statement

3) What is the CM ratio (using the original info provided)?

4) What is the Break-even point in unit and in dollars(using the original info provided)?

Q2)  ABC business had $350,000 in total sales in 2019 and a 35% CM ratio. If its sales are to be increased by $100,000 in 2020, please calculate how much will increase in its net income in 2020.

Answer 1

Solution 1:

Total sales = 21000*$21 = $441,000

Total variable cost = 21000*$13 = $273,000

Total CM = $441,000 - $273,000 = $168,000

Net income = CM - Fixed costs = $168,000 - $57,000 = $111,000

Solution 2:

New Income Statement
Particulars	Amount
Total Sales	$507,150.00
Total Variable Costs	$313,950.00
Contribution margin	$193,200.00
Fixed costs	$57,000.00
Net income	$136,200.00

Solution 3:

CM ratio = $168,000 / $441,000 = 38.10%

Solution 4:

Breakeven point in units = Fixed costs / CM per unit = $57,000 / $8 = 7125 units

Breakeven point in dollars = Breakeven units * Selling price per unit = 7125 * $21 = $149,625

Solution 2:

Increase in its net income in 2020 = Increase in sales * CM ratio = $100,000 * 35% = $35,000