Question

Ritchie Manufacturing Company makes a product that it sells for $160 per unit. The company incurs variable manufacturing costs of $73 per unit. Variable selling expenses are $15 per unit, annual fixed manufacturing costs are $490,000, and fixed selling and administrative costs are $258,800 per year. Required Determine the break-even point in units and dollars using each of the following approaches: a. Use the equation method. b. Use the contribution margin per unit approach c. Prepare a contribution margin income statement for the break-even sales volume. Complete this question by entering your answers in the tabs below. Req A to B Req C Determine the break-even point in units and dollars using the equation method, the contribution margin per unit approach and the contribution margin ratio approach a. Break-even point in units Break-even point in dollars b. Contribution margin per unit Break-even point in units Break-even point in dollars

Answer 1

Selling Price Per unit Varaibel Expense Per unit (73+15) Fixed Expenses (490000+258800) 160 88 748800 Compute the CM ratio and Varaible Expense ratio Selling Price Per unit Varaibel Expense Per unit (73+15) Contribution Margin per unit (Selling Price - Varible Cost) CM Ratio (CM/Selling Price) 160 88 72 45% Equation Method Unit Sales =Fixed Cost /(selling price - Variablecost) 10400 Units 1664000 Dollars reak Even a Break Even in Dollar sales =( selling Price* BEP Units) CM Per Units Method Method b Contribution Margin per unit ( Selling Price - Varible Cost) Break Even in Unit Sales =( Fixed Cost / CM Per unit) Break Even in Dollar sales =( Units *Selling price ) 72 10400 Units 1664000 Dollars

Contibution Income Statement at Break Even Point Total |Selling Price (10400*160) Varaible Cost (10400*88) Contribution Margin Fixed cost 1664000 915200 748800 748800 Net operating income 0