Question

Required information (The following information applies to the questions displayed below.) Hudson Co. reports the contribution margin income statement for 2019. HUDSON CO. Contribution Margin Income Statement For Year Ended December 31, 2019 Sales (11,500 units at $225 each) Variable costs (11,500 units at $180 each) Contribution margin Fixed costs Pretax income $2,587,500 2,070,000 517,500 360,000 $ 157,500 If the company raises its selling price to $300 per unit. 1. Compute Hudson Co.'s contribution margin per unit. 2. Compute Hudson Co.'s contribution margin ratio. 3. Compute Hudson Co.'s break-even point in units. 4. Compute Hudson Co.'s break-even point in sales dollars. per unit in or Contribution margin Contribution margin ratio Break-even point Break-even sales dollars units

Answer 1

Selling price per unit = $300

Variable cost per unit = 180

Fixed cost = $360,000

1. Contribution margin per unit = Selling price per unit - Variable cost per unit

= 300-180

= $120

2. Contribution margin ratio = Contribution margin per unit/ selling price per unit

= 120/300

= 40%

3. Break- even point = Fixed cost / Contribution margin per unit

= 360,000/120

= 3,000 units

4. . Break- even sales dollars = Fixed cost/ Contribution margin ratio

= 360,000/40%

= $900,000

1.	Contribution margin	$120	per unit
2.	Contribution margin ratio	40	%
3.	Break-even point	3,000	units
4.	Break-even sales dollars	$900,000

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