Question

1. Jordan Corporation sells products for $37 each that have variable costs of $14 per unit. Jordan’s annual fixed cost is $522,100. Required Use the per-unit contribution margin approach to determine the break-even point in units and dollars.

Units ______

Dollars ______

2.

Adams Company incurs annual fixed costs of $111,050. Variable costs for Adams’s product are $29.25 per unit, and the sales price is $45.00 per unit. Adams desires to earn an annual profit of $58,000.

Required
Use the per unit contribution margin approach to determine the sales volume in units and dollars required to earn the desired profit. (Do not round intermediate calculations. Round your final answers to the nearest whole number.)

Sales in dollars ______

Sales volume in units ______

Answer 1

1.

Selling price per unit = $37

Variable cost per unit = $14

Fixed cost = $522,100

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

= 37 - 14

= $23

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

= 522,100/23

= 22,700

Contribution margin ratio = Contribution margin per unit /Selling price per unit

= 23/37

= 62.162162162162%

Break even point sales dollar = Fixed cost/Contribution margin ratio

= 522,100/62.162162162162%

= $839,900

2.

Selling price per unit = $45

Variable cost per unit = $29.25

Fixed cost = $111,050

Target profit = $58,000

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

= 45 - 29.25

= $15.75

Contribution margin ratio = Contribution margin per unit /Selling price per unit

= 15.75/45

= 35%

Sales volume in units to earn desired profit = (Fixed cost + Desired profit)/Contribution margin per unit

= (111,050 + 58,000)/15.75

= 169,050/15.75

= 10,733 (rounded to whole number)

Sales volume in dollar to earn desired profit = (Fixed cost + Desired profit)/Contribution margin ratio

= (111,050 + 58,000)/35%

= 169,050/35%

= $483,000