Question

Required information [The following information applies to the questions displayed below.] Adams Company makes and sells products with variable costs of $24 each. Adams incurs annual fixed costs of $321,280. The current sales price is $88. Note: The requirements of this question are interdependent. For example, the $256,000 desired profit introduced in Requirement c also applies to subsequent requirements. Likewise, the $80 sales price introduced in Requirement d applies to the subsequent requirements. b. Determine the break-even point in units and in dollars. Prepare an income statement using the contribution margin format. Complete this question by entering your answers in the tabs below. Req B1 Req B2 Determine the break-even point in units and in dollars. (Do not round intermediate calculations. Round your final answers to the nearest dollar and round units up to the next whole unit.) Break-even point in units Break-even point in dollars < Req B1 Req B2 >

Answer 1

Contribution margin per unit = Sales price per unit - Variable costs per unit

= $88 - $24

= $64

Req B1

Break-even point in units = Fixed costs / Contribution margin per unit

= $321,280 / $64

= 5,020 units

Req B2

Break-even point in dollars = 5,020 units * $88 per unit

= $441,760