Question

Maple Enterprises sells a single product with a selling price of $70 and variable costs per unit of $28. The company's monthly fed expenses are $25.200 A. What is the company's break-even point in units? Break-even units units B. What is the company's break-even point in dollars? Break-even dollars & C. Construct a contribution margin income statement for the month of September when they will sell 900 units. Use a minus sign for a net loss if present Income Statement D. How many units will Maple need to sell in order to reach a target profit of $46,2007 New break-even units units E. What dollar sales will Maple need in order to reach a target profit of $46,2007 New break-even dollars 7. Construct a contribution margin income statement for Maple that reflects $147,000 in sales volume

Answer 1

Ans. A	First of all, we need to calculate the contribution margin per unit for the
	computation of break even point in units.
	Contribution margin per unit = Selling price per unit - Variable cost per unit
	$70 - $28
	$42   per unit
	Break even point in unit sales =   Fixed cost / Contribution margin per unit
	$25,200 / $42
	600 units
Ans. B	Now we will require the contribution margin ratio for the computation of
	break even point in dollars.
	Contribution margin ratio   =   Contribution margin per unit / Selling price * 100
	$42 / $70 * 100
	60.00%
	Break even point in dollar sales =   Fixed cost / Contribution margin ratio
	$25,200 / 60%
	$42,000
Ans. C	Income Statement
	Particulars	Amount
	Sales (900 * $70)	$63,000
	Less: Variable cost (900 * $28)	-$25,200
	Contribution margin	$37,800
	Less: Fixed cost	-$25,200
	Net operating income	$12,600
Ans. D	New break even units =   (Fixed expense + Target profit) / Contribution margin per unit
	($25,200 + $46,200) / $42
	$71,400 / $42
	1,700 units
Ans. E	New break even units =   (Fixed expense + Target profit) / Contribution margin ratio
	($25,200 + $46,200) / 60%
	$71,400 / 60%
	$119,000
Ans. F	*Contribution margin ratio is 60% it means the variable cost on sales
	is 40% (i.e. 1 - 0.60).
	Income Statement
	Particulars	Amount
	Sales	$147,000
	Less: Variable cost ($147,000 * 40%)	-$58,800
	Contribution margin	$88,200
	Less: Fixed cost	-$25,200
	Net operating income	$63,000