Question

Ch 05 Ex 5-11A Save & Exlt Saved Help Subm Check my worl 1 Blanchard Company manufactures a single product that sells for $160 per unit and whose total variable costs are $120 per unit. The company's annual fixed costs are $596,000. (1) Prepare a contribution margin income statement for Blanchard Company showing sales, variable costs, and fixed costs at the break- even point. (2) Assume the company's fixed costs increase by $134,000. What amount of sales (in dollars) is needed to break even? 12 points еВook Complete this question by entering your answers in the tabs below. Hint Ask Required 1 Required 2 Print References Prepare a contribution margin income statement for Blanchard Company showing sales, variable costs, and fixed costs at the break-even point. BLANCHARD COMPANY Contribution Margin Income Statement (at Break-Even) Percentage of sales Amount

Answer 1

Selling price per unit = $160

Variable cost per unit = $120

Fixed costs = $596,000

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

= 160 - 120

= $40

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

= 40/160

= 25%

Break even sales in dollars = Fixed cost/Contribution margin ratio

= 596,000/25%

= $2,584,000

1.

Contribution margin income statement

	Amount	% of sales
Sales	2,384,000	100%
Variable cost	- 1,788,000	75%
Contribution margin	596,000	25%
Fixed cost	- 596,000
Operating income	0

2.

Fixed costs increase by $134,000

Fixed costs will become = 596,000 + 134,000

= $730,000

Break even sales in dollars = Fixed cost/Contribution margin ratio

= 730,000/25%

= $2,920,000

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