Question

# The Company makes and sells products with variable costs of \$24 each. Jordan incurs annual fixed...

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

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...

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