Question

Hudson Co. reports the contribution margin income statement for 2019.

HUDSON CO.
Contribution Margin Income Statement
For Year Ended December 31, 2019
Sales (11,000 units at $300 each)	$	3,300,000
Variable costs (11,000 units at $240 each)		2,640,000
Contribution margin		660,000
Fixed costs		360,000
Pretax income	$	300,000

1. Compute Hudson Co.'s break-even point in units.
2. Compute Hudson Co.'s break-even point in sales dollars.

Answer 1

HUDSON CO. Contribution Margin Income Statement For Year Ended December 31, 2019
Sales              (11,000 units at $300 each)	$3,300,000
Variable costs (11,000 units at $240 each)	2,640,000
Contribution margin	660,000
Fixed costs	360,000
Pretax income	$300,000

(1)

Hudson Co.'s break-even point in units.    =     

Fixed cost contribution margin per unit

   =   

360.000 60

= 6,000 units

Contribution marigin per unit = Selling price per unit - Variable cost per unit

                                              = ($300- $240)   = $60

(2)

Hudson Co.'s break-even point in sales dollars   =   

Fixed cost contribution margin ratio

=   

360,000 20%

    = $1,800,000

Contribution margin ratio = = 20%

60 X 100 300

Thus Hudson Co.'s break-even point in units.    = 6000 units

And Hudson Co.'s break-even point in sales dollars   = $1,800,000