Question

Wesley Company manufactures and sells a single product. The company's sales and expenses for | quarter follow: Sales Less: Variable expenses Total $120,000 72,000 Per Unit $20 12 Contribution margin 48,000 $ 8 Less: Fixed expenses 30,000 Net operating income $ 18,000 Required: 1. What is the quarterly break-even point in units sold and in sales dollars? Break-even point in units sold Break-even point in sales dollars / $ 3,750 75,000 2. Without resorting to computations, calculate the total contribution margin at the break-even point. Total contribution margin

Answer 1

1. Break-even point in units sold = Fixed costs / Contribution margin per unit

= $30,000 / $8

= 3,750 units

2. Break-even point in sales dollars = 3,750 units * $20 per unit

= $75,000

2. Total contribution margin at break-even is equal to fixed costs.

The answer is $30,000