Question

Required Information [The following information applies to the questions displayed below.) Hudson Co. reports the contribution margin Income statement for 2019. HUDSON CO. Contribution Margin Income Statement For Year Ended December 31, 2019 Sales (10,300 units at $375 each) Variable costs (10,300 units at $300 each) Contribution margin Fixed costs Pretax income $3,862,580 3,090, eee 772,5ee 600, eee $ 172,500 If the company ralses its selling price to $400 per unit. 1. Compute Hudson Co.'s contribution margin per unit. 2. Compute Hudson Co.'s contribution margin ratio 3. Compute Hudson Co.'s break-even point in units. 4. Compute Hudson Co.'s break-even point in sales dollars. 1. per unit 2 Contribution margin Contribution margin ratio Break-even point 3. 4. Break-even sales dollars

Answer 1

1. Contribution margin = Selling price - Variable costs per unit

= 400 - 300

= 100

.

2. Contribution margin ratio = Contribution margin/Selling price

= 100/400

= 25%

.

3. Break-even point = Fixed cost/Contribution margin per unit

= 600,000/100

= 6,000

.

4. Break-even sales = Fixed cost /Contribution margin ratio

= 600,000/25%

= 2,400,000