Question

Basic Break-Even Calculations Suppose that Adams Company sells a product for $22.00. Unit costs are as follows: Direct materials $3.80 Direct labour 1.40 Variable factory overhead 2.30 Variable selling and administrative expense 1.40 Total fixed factory overhead is $74,840 per year, and total fixed selling and administrative expense is $54,195. Required: 1. Calculate the variable cost per unit and the contribution margin per unit. Round your answers to the nearest cent and use rounded amounts in subsequent requirements. Variable cost per unit Contribution margin per unit 2. Calculate the contribution margin ratio and the variable cost ratio. Round your answer to the nearest whole pereent, if required Contribution margin ratio Variable cost ratio 3. Calculate the break-even units. units 4. Prepare a contribution margin income statement at the break-even number of units. Round your answers to the nearest dollar, if required. If an amount is zero, enter "o". Adams Company Contribution Margin Income Statement At Break-Even Number of Units

Answer 1

1
Variable cost per unit	8.90	=3.80+1.40+2.30+1.40
Contribution margin per unit	13.10	=22-8.90
2
Contribution margin ratio	60%	=13.10/22
Variable cost ratio	40%	=1-60%
3
Fixed expense	129035	=74840+54195
Divide by Contribution margin per unit	13.10
Break-even units	9850	units
4
Contribution Margin Income Statement
Sales	216700	=9850*22
Total variable expense	87665	=9850*8.90
Total Contribution margin	129035
Total fixed expense	129035
Operating Income	0