Question

Ritchie Manufacturing Company makes a product that it sells for $150 per unit. The company incurs variable manufacturing costs of $60 per unit. Variable selling expenses are $18 per unit, annual fixed manufacturing costs are $480,000, and fixed selling and administrative costs are $240,000 per year.

C. Use the contribution margin ratio approach.

Contribution margin ratio: ___%

Break-even point in units: ___

Break-even point in dollars: $___

Answer 1

Solution

Contribution margin ratio: 48%

Break-even point in units: 10000 units

Break-even point in dollars: $1,500,000

Working

Computation of Company's Contribution margin per unit
	Sales price per unit		$          150.00
	Variable cost per unit		$            78.00
	Contribution margin		$            72.00
Compute the Companies contribution margin ratio
	Numerator	/	Denominator	Contribution margin ratio
	Contribution margin per unit	/	Sales price per unit	Contribution margin ratio
	$              72.00	/	$          150.00	48%
Compute The companies breakeven point in units
	Numerator	/	Denominator	Breakeven in units
	Fixed costs	/	Contribution margin per unit	Breakeven in units
	$ 720,000.00	/	$            72.00	10000
Compute Breakeven point in sales dollars
	Numerator	/	Denominator	Breakeven in Dollars
	Fixed costs	/	Contribution margin ratio	Breakeven in Dollars
	$ 720,000.00	/	48%	$ 1,500,000.00