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) $ 2,160,000 Variable costs (9,600 units at $180 each) 1,728,000 Contribution margin $ 432,000 Fixed costs 324,000 Pretax income $ 108,000 Exercise 21-19 Evaluating strategies LO C2 If the company raises its selling price to $240 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.

Answer 1

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Answers are highlighted in yellow: Solution: 1) Contribution Margin (CM) 432000 Units sold 9600 Contribution margin per unit $ 45 (CM/Sales) (432000/2160000) 2) Contribution margin ratio 0.20 or 20% 3) Break even point in units Fixed cost/Contribution Margin per unit (324000/45) = 7200 units 4)Break even point in Dollar Fixed cost/ Contribution Margin Ratio (324000/20%)= 1620000 units