Question

Problem 11-4 NYM Manufacturing Company makes a product. Selling Price per unit Variable manufacturing cost per unit Variable selling expense per unit (sales commissions) Annual Fixed Manufacturing Costs Annual Fixed Selling and Admin Costs 150 80 25 40,000 s 60,000 REQUIRED Determine the break-even point in units and dollars using the following approaches. 1 Equation method 2 Contribution margin per unit. 3 Contribution margin ratio. 4 Confirm your results by preparing a contribution margin income statement for the breakeven sales volume

Answer 1

1) break even equation method

Break Even Point Fixed Costs Break Even Point in Units - Sales Price per Unit - Variable Cost per Unit

Break Even Point Break Even Point in Dollars Sales Price per Unit x Break Even Point in Units

total cost fixed cost = 40000 + 60000

sales - variable cost per unit = 150 - (80+25) = 45

=100,000 / 45 = 2222.22 unit

break even point dollar = 150 * 2222.22 = 333,333 dolar

2)

contribution margin = sales - variable cost

150 - (80 + 25) = 45

contribution margin = 45

3)

contribution margin ratio =

contribution margin / sales

45 / 150 = 30%

4)

contribution margin statement

sales   2222.22 * 150		333,333
variable manufacturing cost 80 * 2222.22	177,777.6
gross margin		155555.4
variable selling expenses	55555.5
contribution		100,000
fixed manufacture cost	40,000
fixed selling expenses	60,000
income statement		0