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Required information Problem 21-4A Break-even analysis; income targeting and forecasting LO C2, P2, A1 (The following informaRequired information Problem 21-4A Break-even analysis; income targeting and forecasting LO C2, P2, A1 (The following informa

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Answer #1

Part a

contribution margin per unit = contributed margin/ no of units

= 145432/19600 = 7.42

contribution margin ratio = contribution margin (numerator)/sales(denominator)

= 145432 / 727160 = 2:10

break even point in sales = fixed expenses / contribution margin ratio = 192000/(2/10) = 960000

part b

proposed contribution margin per unit = 727160 - 290864 = 436296/19600 = 22.26

variable cost will be reduced by 50%.hence variable cost per unit = 581728/19600= 29.68

new variable cost = 29.68 less 50% = 14.84x19600 = 290864

contribution margin ratio = contribution /sales = 436296/727160 = 6:10

break even point in sales with new machine = fixed cost / contribution margin ratio

=338000/(6/10)= 563333.33

fixed cost new = 192000 + 146000(new machine)= 338000

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