The budgets of four companies yield the following information:

Company
		Q	R	S	T
	Target sales . . . . . . . . . . . . . . . .	$680,000	$445,000	$224,000	$
	Variable expenses . . . . . . . . . .	170,000			156,000
	Fixed expenses . . . . . . . . . . . . .		159,000	93,000
	Operating income (loss) . . . . . .	$150,000	$	$	$131,000
	Units sold . . . . . . . . . . . . . . . . .		106,800	12,500	16,000
	Contribution margin per unit . . .	$6.25	$	$8.96	$39.00
	Contribution margin ratio . . . . .		0.60

Requirements

1.	Fill in the blanks for each company.
2.	Compute break-even, in sales dollars, for each company. Which company has the lowest break-even point in sales dollars? What causes the low break-even point?

Requirement 1. Fill in the blanks for each company. (Round the contribution margin per unit and ratio calculations to two decimal places.)

		Q
	Target sales . . . . . . . . . . . . . . . . . .	$680,000
	Variable expenses . . . . . . . . . . . . .	170,000
	Fixed expenses . . . . . . . . . . . . . . .
	Operating income (loss) . . . . . . . .	$150,000
	Units sold . . . . . . . . . . . . . . . . . . . .
	Contribution margin per unit . . . . .	$6.25
	Contribution margin ratio . . . . . . . .

Solutions

Expert Solution

	Q	R	S	T
Target sales . . . . . . . . . . . . . . . .	$680,000	$445,000	$224,000	$780000 [SALES-9.75=39] 48.75*16000UNITS
Variable expenses . . . . . . . . . .	170,000	178000 [445000(1-CONTRIBUTION MARGIN)44500040%)	112000 [224000*0.5]	156,000 [156000/16000]9.75$ PER UNIT
Fixed expenses . . . . . . . . . . . . .	360,000	159,000	93,000	493000
Operating income (loss) . . . . . .	$150,000	$108000 [445000-178000-159000]	$19000 [224000-112000-93000]	$131,000
Units sold . . . . . . . . . . . . . . . . .	81600	106,800	12,500	16,000
Contribution margin per unit . . .	$6.25	$2.5 [445000*60%]/106800	$8.96	$39.00
Contribution margin ratio . . . . .	0.75	0.60	0.5 [224000/12500] 8.96/17.92$SALES PRICE	0.8 [39/48.75]
BREAK EVEN POINT IN DOLLAR = fixed cost /contribution margin ratio	480000$ [360000/.75]	265000$ [159000/0.60]	186000$ [93000/0.5]	616250$

Q = SALES-VARIABLE COST-FIXED COST = OPERATING INCOME

=680000-170000-FIXED COST =150000

FIXED COST =680000-150000-170000

=360000

CONTRIBUTION MARGIN PER UNIT = CONTRIBUTION MARGIN/ UNITS SOLD

6.25 = (SALES- VARIABLE COST) / UNITS SOLD

6.25 = (680000-170000)/UNITS SOLD

6.25 = 510000/ UNITS SOLD

UNITS SOLD =81600 UNITS

CONTRIBUTION MARGING RATIO = CONTRIBUTION MARGIN PER UNIT/ SALES PER UNIT

SALES = 680000/81600UNITS = 8.33$

=6.25/8.33

=75%

2. S HAS HE LOWEST BREAK EVEN SALES

LOWER FIXED COST AND HIGHER CONTRIBUTION MARGIN CAUSES LOW BREAK EVEN SALES.

ekkarill92 answered 1 year ago

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​The budgets of four companies yield the following information:

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The budgets of four companies yield the following information: