Question

Problem 2 A company has provided the following data: Sales 3,000 units Sales price $70 per unit Variable cost $50 per unit Fixed cost $25,000 a) Compute the breakeven sales in units? b) Prepare a CM format income statement at BE. c) Compute the CM ratio. ) Refer to the original data. Comnute the operating income if the sales volume decrease 10%, total fixed cost increases by 20%, and all other factors remain the same.

Answer 1

Solution a:

CM per unit = Selling price per unit - Variable cost per unit = $70 - $50 = $20 per unit

Fixed costs = $25,000

Breakeven sales units = Fixed costs / CM per unit = $25,000 / $20 = 1250 units

Solution b:

Income Statement - BE
Particulars	Amount
Sales revenue	$210,000.00
Variable costs	$150,000.00
Contribution margin	$60,000.00
Fixed costs	$25,000.00
Net operating income	$35,000.00

Solution c:

CM ratio = CM per unit / Selling price per unit = $20 / $70 = 28.57%

Solution d:

Income Statement - BE
Particulars	Amount
Sales revenue	$189,000.00
Variable costs	$135,000.00
Contribution margin	$54,000.00
Fixed costs	$30,000.00
Net operating income	$24,000.00