Question

Hudson Co. reports the contribution margin income statement for 2019 below. Using this information, compute Hudson Co.'s (1) break-even point in units and (2) break-even point in sales dollars. Contribution Margin Income Statement For Year Ended December 31, 2019 Sales (9,600 units at $225 each) Variable costs (9,600 units at $180 each) Contribution margin Fixed costs Pretax income $2,160,000 1,728,000 432,000 324,000 $ 108,000

Answer 1

1)Compute break even point in units

Break even point in units=fixed cost/CONTRIBUTION MARGIN PER UNIT

   CONTRIBUTION MARGIN PER UNIT=selling price - variable cost per unit

   = $225 - $180

=$45

Therefore break even point in units= $324000/$45

   = 7200 units

Break even point in dollars=break even units×selling price per unit

   =7200units×$225=$1620000

2). Company A

Particular	per unit	amount ($)
Sales	$65	208000
(-) variable expenses	(b)$47	(150400)
CONTRIBUTION	(d)$18	(c)57600
(-) fixed expenses	(f)$3.5	(e)11200
NET OPERATING INCOME	(g) $14.5	46400

a)no of units sold= sales/selling price per unit

   $208000/$65

   =3200 units

b) variable cost per unit=variable expenses/units sold

   = $150400/3200

   =$47

c) CONTRIBUTION MARGIN=sales - variable expenses

   =$208000 - $150400

   = $57600

d) CONTRIBUTION MARGIN PER UNIT = CONTRIBUTION MARGIN/units sold

   = $57600/3200

   =$18

e) fixed expenses=CONTRIBUTION MARGIN - NET income

   = $57600 - $46400

   = $11200

f) fixed expenses per unit= fixed expenses/units sold

   =. $11200/3200

   =$3.5

g)net operating income per unit= net income/units sold

   = $46400/3200

   =$14.5

3). Company B

Particular	per unit	amount ($)
Sales	(I)$42	(h)82950
(-) variable expenses	(j)$20	(39500)
CONTRIBUTION	(k)$22	43450
(-) fixed expenses	(l)$10	(19750)
NET OPERATING INCOME	(n)$12	(m)23700

h) sales = variable expenses+CONTRIBUTION MARGIN

   = $39500+$43450

   =$82950

(I) selling price per unit= sales/units sold

   =$82950/1975

   = $42

(j) variable expense per unit= variable expenses/units sold

   =$39500/1975

   = $20

​​​​​​(k) CONTRIBUTION MARGIN PER UNIT=CONTRIBUTION MARGIN/units sold

   = $43450/1975

   =$22

(l) fixed expenses per unit= fixed expenses/units sold

   = $19750/1975

   =$10

(m) net operating income= CONTRIBUTION MARGIN - fixed expenses

   =$43450 -$19750

   =$23700

(n) net operating income per unit= net operating income/units sold

   =$23700/1975

   =$12

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