Question

! Required information [The following information applies to the questions displayed below.] Hudson Co. reports the contribution margin income statement for 2019. HUDSON CO. Contribution Margin Income Statement For Year Ended December 31, 2019 Sales (10,700 units at $300 each) Variable costs (10,700 units at $240 each) Contribution margin Fixed costs Pretax income $3,210,000 2,568,000 642,000 504,000 $ 138,000 1. Compute Hudson Co.'s break-even point in units. 2. Compute Hudson Co.'s break-even point in sales dollars. 1. units Break-even point 2. Break-even point

Answer 1

HUDSON CO Contribution Margin Income Statement for year ended December 31, 2019 Particulars Amt ind Sales C10,700 units at $ 300 each) $ 3,210,000 less Variable costs (10,700 unit @ $240 2,568,000 Contribution Margin 6,42,000 less fixed costs 5,04,000 Pretax income $ 1, 38,000 1) Computation of Hudson's co break even point in units. per unit cost pes Break Even Point (in units) = fixed cost Selling price Variable unit 5,04,000 8,400 units 300-240 & Break Even point in units = 8,400 units 504000 60 2. Computation of Hudson co's break even point in sales. Break Even Point (in sales) = fixed cost Contribution / sales : 504,000 5,04,000 X 3,210,000 642000/3,210,000 642000 sou,000 25,20,000 0.2 I! Break Even point in sales = $ 25, 20,000 2

$ 320 per If the company raises its selling price to unit. Contribution Margin Sncome statement Particulars Amt in $ Sales (10,700 units at $320 each ) $ 3424000 less Variable costs (10,700 units @ 240) 2568000 Contribution Margin 856000 less fixed costs 504000 Pretax income $ 352000 © Computation of Hudson co's contribution margin per unit. Contribution margin per unit - Contribution margin sales in units 80 856000 10, 700 . Contribution pe margin per unit = 80€ & Computation of Hudson co's contribution margin matio Sales Contribution margin ratio = Variable cost -X 100 Sales X100 z 3424000- 2568000 856000 3424000 3424000 25:4 l. Contribution Margin Ratio 25% 8. PRO u

3) Computation of Hudson co's Break Even Polnt in units. Break Even Point in Units fixed cost Selling price - Variable price unit Cost per unit 6,300 units 504,000 = souooo 320-240 80 1. Break even Point in Units = 6,300 units. A Computation of Hudson co's Break even point In sales Break Even point in sales fixed cost Contribution margin ratio 504000 20,16,000 $ 25% ! Breats Even Point in sales = 20,16000 $ -