Ans. A | Equation method: | |||
We assumed that the break even units are X. | ||||
On the break even level of sales the net income of the company is $0. | ||||
Break even is the level of activity on which the firm does not generate profit or occur any loss. | ||||
So, the Profit is zero which is equal to the difference of Contribution margin and fixed cost. | ||||
*Contribution margin per unit = Selling price per unit - Total variable expenses per unit | ||||
$160 - $88 = $72 per unit | ||||
Net operating income = (Contribution margin per unit * Break even units) - Total fixed cost | ||||
0 = ($72 * X) - $770,400 | ||||
$770,400 = $72 * X | ||||
Break even quantity (X) = $770,400 / $72 | ||||
10,700 units | ||||
Break even point in dollars = (Variable cost per unit * Break even quantity) + Fixed cost + Net income | ||||
($88 * 10,700) + $770,400 + $0 | ||||
$941,600 + $770,400 + $0 | ||||
$1,712,000 | ||||
Ans. B | Contribution Margin Per Unit Approach: | |||
Break even point in units = Total fixed cost / Contribution margin per unit | ||||
$770,400 / $72 | ||||
10,700 units | ||||
Break even point in dollars = Break even point in units * Selling price per unit | ||||
10,700 * $160 | ||||
$1,712,000 | ||||
Ans. C | RITCHIE MANUFACTURING COMPANY | |||
Contribution Margin Income Statement | ||||
Total | ||||
Sales (10,700 * $160) | $1,712,000 | |||
Variable expenses (10,700 * $88) | -$941,600 | |||
Contribution margin | $770,400 | |||
Fixed expenses | -$770,400 | |||
Net operating income | $0 | |||
P = price per unit | ||||
V = variable cost per unit | ||||
*Working Notes: | ||||
*Calculations of Total variable expenses per unit : | ||||
Total variable expenses per unit = Variable manufacturing cost per unit - Variable selling expense per unit | ||||
$70 + $18 = $88 per unit | ||||
*Calculations of Total Fixed Cost : | ||||
Total fixed cost = Fixed manufacturing cost - Fixed selling and administrative cost | ||||
$496,000 + $274,400 = $770,400 | ||||
Problem 11-28 Determining the break-even point and preparing a contribution margin income statement LO 11-5 Ritchie...
Problem 11-28 Determining the break-even point and preparing a contribution margin income statement LO 11-5 Ritchie Manufacturing Company makes a product that it sells for $140 per unit. The company incurs variable manufacturing costs of $61 per unit. Variable selling expenses are $16 per unit, annual fixed manufacturing costs are $380,000, and fixed selling and administrative costs are $281,500 per year. Required Determine the break-even point in units and dollars using each of the following approaches: a. Use the equation...
Problem 11-28 Determining the break-even point and preparing a contribution margin income statement LO 11-5 Ritchie Manufacturing Company makes a product that it sells for $150 per unit. The company incurs variable manufacturing costs of $64 per unit. Variable selling expenses are $17 per unit, annual fixed manufacturing costs are $494,000, and fixed selling andd administrative costs are $237,400 per year. Required Determine the break-even point in units and dollars using each of the following approaches: a. Use the equation...
Problem 11-28 Determining the break-even point and preparing a contribution margin income statement LO 11-5 Ritchie Manufacturing Company makes a product that it sells for $200 per unit. The company incurs variable manufacturing costs of $101 per unit. Variable selling expenses are $19 per unit, annual fixed manufacturing costs are $464,000, and fixed selling and administrative costs are $256,000 per year. Required Determine the break-even point in units and dollars using each of the following approaches: Use the equation method....
Problem 11-28 Determining the break-even point and preparing a contribution margin income statement LO 11-5 Ritchie Manufacturing Company makes a product that it sells for $140 per unit. The company incurs variable manufacturing costs of $73 per unit. Variable selling expenses are $11 per unit, annual fixed manufacturing costs are $468,000, and fixed selling and administrative costs are $271,200 per year. Required Determine the break-even point in units and dollars using each of the following approaches: a. Use the equation...
Problem 3-17A (Algo) Determining the break-even point and preparing a contribution margin income statement LO 3-1 Ritchie Manufacturing Company makes a product that it sells for $200 per unit. The company incurs variable manufacturing costs of $101 per unit. Variable selling expenses are $19 per unit, annual fixed manufacturing costs are $464,000, and fixed selling and administrative costs are $256,000 per year. Required Determine the break-even point in units and dollars using each of the following approaches: a. Use the...
Problem 11-28 Determining the break-even point and preparing a contribution margin income statement LO 11-5 Ritchie Manufacturing Company makes a product that it sells for $140 per unit. The company Incurs variable manufacturing costs of $78 per unit. Variable selling expenses are $13 per unit, annual fixed manufacturing costs are $350,000, and fixed selling and administrative costs are $149,800 per year. Required Determine the break-even point in units and dollars using each of the following approaches: a. Use the equation...
Help Problem 11-28 Determining the break-even point and preparing a contribution margin income stat LO 11-5 Ritchie Manufacturing Company makes a product that it sells for $170 per unit. The company incurs variable manufacturing cost $83 per unit Variable selling expenses are $19 per unit, annual fixed manufacturing costs are $498,000, and fixed selling and administrative costs are $236,400 per year Required Determine the break-even point in units and dollars using each of the following approaches: a. Use the equation...
Problem 3-17A (Algo) Determining the break-even point and preparing a contribution margin income statement LO 3-1 Ritchie Manufacturing Company makes a product that it sells for $130 per unit. The company incurs variable manufacturing costs of $66 per unit. Variable selling expenses are $12 per unit, annual fixed manufacturing costs are $450,000, and fixed selling and administrative costs are $226,000 per year. Required Determine the break-even point in units and dollars using each of the following approaches: a. Use the...
ercises Chapter One Saved 1 Problem 3-17A (Algo) Determining the break-even point and preparing a contribution margin income statement LO 3-1 Ritchie Manufacturing Company makes a product that it sells for $180 per unit. The company incurs variable manufacturing costs of $100 per unit. Variable seling expenses are $17 per unit, annual fixed manufacturing costs are $460,000, and fixed selling and administrative costs are $195.200 per year Required Determine the break-even point in units and dollars using each of the...
Ritchie Manufacturing Company makes a product that it sells for $200 per unit. The company incurs variable manufacturing costs of $110 per unit. Variable selling expenses are $20 per unit, annual fixed manufacturing costs are $466,000, and fixed selling and administrative costs are $269,000 per year. Required Determine the break-even point in units and dollars using each of the following approaches: a. Use the equation method. b. Use the contribution margin per unit approach. c. Prepare a contribution margin income...