In: Accounting
Use the information from the following Income Statement to solve for the questions at bottom of the page. Complete the grey sections | |||||||
Income Statement | |||||||
Sales Revenue | $2,250,000 | ||||||
Variable Costs | |||||||
Purchases | $425,000 | ||||||
Direct labor | $395,000 | $820,000 | |||||
$1,430,000 | |||||||
Fixed Costs | |||||||
Selling | $175,000 | ||||||
Administrative | $110,000 | $285,000 | |||||
The above is based on sales of 20,000 units. | |||||||
1. Contribution Margin | |||||||
2. Selling price per unit | |||||||
3. Variable labor cost per unit | |||||||
4. Variable purchases cost per unit | |||||||
5. Breakeven point in units and dollars | |||||||
1. Contribution Margin
= Sales – Variable costs
= $2,250,000 / $820,000
= $1,430,000
2. Selling price per unit
= Sales Revenue / Number of units
= $2,250,000 / 20,000 Units
= $112.50 per unit
3. Variable labor cost per unit
= Variable labor cost / Number of units
= $395,000 / 20,000 Units
= $19.75 per unit
4. Variable purchases cost per unit
= Variable purchases cost / Number of units
= $425,000 / 20000 Units
= $21.25 per unit
5. Breakeven point in units and dollars
Contribution per unit
= Contribution Margin / Number of units
= $1,430,000 / 20,000 Units
= $71.50 per unit
Contribution ratio = 71.50 / 112.50 = 63.55%
Breakeven point in units = Fixed Costs / Contribution per unit
= $285,000 / 71.50
=3986 Units
Breakeven point in Dollars = Fixed Costs / Contribution ratio
= $285,000 / 0.6355
= $ 448466