Question

The Company makes and sells products with variable costs of $24 each. Jordan incurs annual fixed costs of $372,960. The current sales price is $96. Note: The requirements of this question are interdependent. For example, the $288,000 desired profit introduced in Requirement c also applies to subsequent requirements. Likewise, the $80 sales price introduced in Requirement d applies to the subsequent requirements.
A. Determine the determine the break-even point in units and dollars. Prepare an income statement using the contribution margin format

Answer 1

Requirement A:

1. Break even point in Units

Break even point in units = Fixed cost / Contribution magin per unit

Contribution margin per unit = Selling price per unit - Variable cost per unit

Contribution margin per unit = $96 - $24 = $72 per unit

Fixed cost = $372,960

Break even point in units = $372,960 / $72 per unit = 5,180 units

2. Break even point in dollars

Break even point in dollars = Fixed cost / Contribution margin ratio

Contribution margin ratio = $72 / $96 * 100 = 75%

Break even point in dollars = $372,960 / 75% = $497,280

3. Income Statement

Particulars	$
Sales (5,180 Units * $96)	497,280
Less: Variable cost (5,180 * $24)	124,320
Contribution margin	372,960
Less: Fixed cost	372,960
Net operating income	0

All the best...