Question

Contribution Margin Income Statement and Ratio ESA. Bowery Company manufactures a single product that sells for S100 per unit. The company projects sales of 400 units per month. Projected costs follow. LO 2,4 RATIO Type of Cost Variable Nonvariable Manufacturing $10,000 13,000 Nonmanufacturing $6,000 5,000 1. Prepare a contribution margin income statement for the month. 2. What is the contribution margin ratio? . What volume, in terms of units, must the company sell to break even?

Answer 1

Requirement 1

Contribution margin Income statement
For the Month
Sales		$       40,000.00
Less: Variable costs
Manufacturing Variable cost	$       10,000.00
Non-manufacturing variable cost	$         6,000.00
Total Variable cost		$       16,000.00
Contribution margin		$       24,000.00
Less: Fixed Costs
Manufacturing Fixed cost	$       13,000.00
Non-manufacturing Fixed cost	$         5,000.00
Total Fixed Costs		$       18,000.00
Net Operating Income		$         6,000.00

Requirement 2

Sales	$     40,000.00
Contribution margin	$      24,000.00
Contribution margin ratio	60%

Requirement 3

Total fixed cost	$      18,000.00
Contribution margin per unit(100 x 60%)	$              60.00
Breakeven point in units(18000/60)	300

Number of items to be sold to breakeven is 300