Question

Required information Use the following information for the Exercises below. [The following information applies to the questions displayed below.] Hudson Co. reports the contribution margin income statement for 2017 HUDSON CO. Contribution Margin Income Statement For Year Ended December 31, 2017 Sales (9,600 units at $225 each) Variable costs (9,600 units at $180 each) Contribution margin Fixed costs Pretax income $2,160,000 1,728,000 $ 432,000 324,000 $ 108,000 Exercise 18-16 Break-even LO P2 1. Compute Hudson Co.'s break-even point in units and 2. Compute Hudson Co.'s break-even point in sales dollars. units Break-even point Break-even point 2.

Answer 1

Contribution Margin per unit = Total contribution Margin/Number of units	=432000/9600	45
Contribution Margin Ratio = Contribution Margin/Sales	=432000/2160000	20%
Break even point in units = Fixed costs/CM per unit	=324000/45	7,200	units
Break even point in Dollars = Fixed costs/CM Ratio	=324000/20%	1,620,000
Sales Required = (Desired Pretax income + Fixed costs)/CM Ratio	=(162000+324000)/20%	2430000
Margin of Safety % = (Sales - break even sales)/Sales		33.33%
Forecasted Income Statement
Sales	2160000
Variable costs	1641600
Contribution Margin	518400
Fixed costs	364500
Income	153900
Purchase?	Yes, since increase in income
Forecasted Income Statement
Sales	2475000
Variable costs	1980000
Contribution Margin	495000
Fixed costs	405000
Income	90000
Advertising cost?	No, since Decrease in income

18-27

	Company A		Company B
Number of units sold	5100		2450
	Total	Per unit	Total	Per unit
Sales	525300	103	335650	137
Variable costs	336600	66	142100	58
Contribution Margin	188700	37	193550	79
Fixed costs	66300	13	71050	29
Net Income	122400	24	122500	50