Question

Exercise 178 The income statement for Bradford Machine Company for 2015 appears below. BRADFORD MACHINE COMPANY Income Statement For the Year Ended December 31, 2015 Sales (40,000 units) $1,000,000 Variable expenses 700.000 Contribution margin 300,000 Fixed expenses 360,000 Net income (loss) ($60,000) Answer the following independent questions and show computations using the contribution margin technique to support your answers: What was the company's break-even point in sales dollars in 2015? Break-even point in sales dollars How many additional units would the company have had to sell in 2016 in order to earn net income of $45,000? Additional units If the company is able to reduce variable costs by $2.50 per unit in 2016 and other costs and unit revenues remain unchanged, how many units will the company have to sell in order to earn a net income of $45,000? Number of units sold units Question Attempts: 0 of 3 used

Answer 1

Units а Sooo Sales Less:Variable cost Conribution (30%) Less: Fixed expense Net Income (Loss) (c-d) Rate/unit Value 40000 25 $ 1,000,000.00 $ 700,000.00 7.5 $ 300,000.00 $ 360,000.00 $ -60,000.00 Answer 1 Break-even Point ins sales 2015 Break-even Point (value) Total Fixed expenses / PV Ratio а Total Fixed expenses (given in question) PV Ratio Break-even Point (value) (a/b) $ 350,000.00 30% $ 1,200,000.00 Contribution / Sales PV Ratio * * Profit Volume Ratio Contribution Sales PV Ratio (a/b) $ 300,000.00 $ 1,000,000.00 30%

Answer 2 Additional units to be sell to earn net income $ 45,000 in 2016 Sale units to earn profit of $45,000 = Fixed expense + Desired Profit/ Contribution per unit $ $ 360,000.00 45,000.00 Fixed Expense (given in question) Desired Profit (given in question) Contribution per unit Sale units to earn profit of $45,000 = Sale units to earn profit of $45,000 = $360,000+ $45,000 / $7.5 366000 Units Selling price * PV ratio Contribution per unit = Selling Price ($) PV Ratio Contribution $ per unit 30% 7.5

Answer 3 Here, Fixed cost remain same Unit revenue also remain unchanged Reverse calculation to do Units Net Income (given) Add :Fixed expense (remain unchanged) Contribution Variable cost (17.5-2.5) Sales (Unit revenue remain unchanged) Rate/unit Value $ 45,000.00 $ 3,60,000.00 $ 4,05,000.00 15.0 Contribution per unit (g-h) Sale per unit Variable cost (17.5-2.5) PV ratio for 2016 $ 4,05,000.00 Contribution (c) Sales per unit price Number of unit sold (units) (1/3) 405001