Question

Malden Corporation has annual fixed costs of $2,000,000, variable costs of $40 per unit and a selling price of $100 per unit. What is Malden’s breakeven point in units?

Bluff Corporation has a selling price per unit of $20 and a variable cost per unit of $12. What is Bluff’s contribution margin per unit in dollars and what is its contribution margin in percentage terms?

  Dexter Corporation projects the following units and selling prices:

Year 1 Year 2 Year 3 Year 4

Unit sales 1,000 1,500 2,000 3,000

Selling price per unit $10 $12 $15 $18

Please calculate Dexter’s projected or proforma sales.

Continuing from the prior problem, Dexter has the following fixed cost per year and variable cost per unit each year:

Year 1 Year 2 Year 3 Year 4

Annual fixed costs $2,000 $2,100 $2,200 $2,400

Variable costs per unit $5 $6 $8 $9

Answer 1

1. Malden’s breakeven point in units
= 2,000,000 / (100 - 40)
= 33,333 units

2. Bluff’s contribution margin per unit in dollars
= 20 - 12
= $ 8

Bluff’s contribution margin per unit in dollars
= 8 / 20
= 40%

3.

	Year 1	Year 2	Year 3	Year 4
Unit sales	1,000	1,500	2,000	3,000
Selling price per unit	$10	$12	$15	$18
Sales	$10,000	$18,000	$30,000	$54,000
Variable costs per unit	$5	$6	$8	$9
Less: Variable costs	-$5,000	-$9,000	-$16,000	-$27,000
Contribution Margin	$5,000	$9,000	$14,000	$27,000
Less: Annual fixed costs	$2,000	$2,100	$2,200	$2,400
Net Income (loss)	$3,000	$6,900	$11,800	$24,600