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Use the information from the following Income Statement to solve for the questions at bottom of...

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

Solutions

Expert Solution

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

ekkarill92 answered 2 years ago
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