Question

Required information e following information applies to the questions displayed below. n Co. reports the contribution margin income statement for 2017 HUDSON CO Contribution Margin Income Statement For Year Ended December 31, 2017 Sales (10,300 units at $375 each) Variable costs (10, 300 units at $300 each) Contribution margin Fixed costs Pretax income $3,862,500 3,090,000 $ 772,500 600,000 $ 172,500 1. Compute Hudson Co.'s break-even point in units and. 2. Compute Hudson Co.'s break-even point in sales dollars 1. Break-even point 2. Break-even point units

3.4.

5.

6.

Answer 1

1

	Contribution margin ratio
Ref	Particulars	Amount
a	Sales revenue	3,862,500
b	Contribution	772,500
c=b/a *100	Contribution margin ratio	20%
	Break even point
a	Contribution per unit	75.00
b	Fixed costs	600,000
c=b/a	BEP units	8,000.00

2

	Break even point
Ref	Particulars	Amount
a	Contribution margin ratio	20%
b	Fixed costs	600,000
c=b/a	BEP sales	3,000,000

3

Particulars	Amount
Required profit	169,000
Fixed costs	600,000
Required contribution	769,000
CMR	20%
Required sales	3,845,000

Margin of safety

	Margin of safety
Ref	Particulars	Amount
a	Current sales	3,845,000
b	BE sales	3,000,000
c= a-b	Margin sales	845,000
d= c/a	Margin of safety	21.98%

4

Income statement
Particulars	Per unit	Total
Units		10,300
Sales revenue	375.00	3,862,500
Minus:
Variable cost	290.00	2,987,000
Contribution	85.00	875,500
Minus:
Fixed cost		644,000
Net operating income		231,500

Company should purchase as it increases the profit by 59000

5

Income statement
Particulars	Per unit	Total
Units		10,300
Sales revenue	400.00	4,120,000
Minus:
Variable cost	300.00	3,090,000
Contribution margin	100.00	1,030,000
Minus:
Fixed cost		600,000
Net operating income		430,000

Contribution margin ratio
Ref	Particulars		Amount
a	Sales revenue		4,120,000
b	Contribution margin		1,030,000
c=b/a *100	Contribution margin ratio		25%

Break even point
a	Contribution per unit	100.00
b	Fixed costs	600,000
c=b/a	BEP units	6,000.00

Break even point
a	Contribution margin ratio	25%
b	Fixed costs	600,000
c=b/a	BEP sales	2,400,000

6

Income statement
Particulars	Per unit	Total
Units		11,700
Sales revenue	375.00	4,387,500
Minus:
Variable cost	300.00	3,510,000
Contribution margin	75.00	877,500
Minus:
Fixed cost		765,000
Net operating income		112,500
Existing income		172,500
Change		-60,000

It decrease net income, should not spend for the proposed expenditure.