Question

Cranberry Wood Products Inc. spends an average of $9.30 in labor and $12.60 in materials on...

Cranberry Wood Products Inc. spends an average of $9.30 in labor and $12.60 in materials on every unit it sells. Sales commissions and shipping amount to another $3.10. All other costs are fixed and add up to $149,000 per month. The average unit sells for $32.00.

  1. What is Cranberry's contribution? Round the answer to two decimal places.
    $

    What is Cranberry's contribution margin? Round the answer to two decimal places.
    %
  2. What is the firm's breakeven point in units? Round the answer to the nearest whole number.
    units
  3. Calculate the dollar breakeven point. Do not round intermediate calculations. Round the answer to the nearest whole dollar.
    $
  4. Sketch the breakeven diagram.
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Homework Answers

Answer #1

a. Contribution per unit = Sales Price - Variable Price =

Selling Price 32
Variable Costs
Labor -9.3
Materials -12.6
Sales Commission &
Shipping -3.1
Contribution per Unit 7.0

b. Breakeven Point in Units = Fixed Costs / Contribution per unit = 149000 / 7 = 21285.7 = 21286 Units

c. Dollar Breakeven point = 21286 * 32 = 681,152 $

d. Break even Graph

Units Sold Contribution Fixed Costs Profit / (Loss)
15000 105000 149000 -44000
18000 126000 149000 -23000
21285.71429 149000 149000 0
24000 168000 149000 19000
26000 182000 149000 33000
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