Problem 2 A company has provided the following data Sales 3.000 units Sales price $70 per...

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Problem 2 A company has provided the following data Sales 3.000 units Sales price $70 per unit Variable cost $50 per unit Fix

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Answer 1

Answer #1

A) Selling price = $70

Less: variable cost = $50

Contribution Margin = $20

Break even point in units = Fixed cost / Contribution margin = $25,000 / $20 = $1,250 units

B) Contribution Margin statement at break-even point.

Sales (1,250 * 70) = $87,500

Less: Variable cost (1,250 * 50) = $62,500

Contribution Margin = $25,000

Less: Fixed cost = $25,000

Operating Income = $0

C) Contribution Margin ratio.

Contribution Margin / sales = $20 / $70 = 0.2857 or 28.57.

D) Revised sales volume = 3000 * 90% = 2,700 units

Contribution margin at 2,700 units = 2,700 *20 = $54,000

Less: Fixed cost (25,000*120%) = ($30,000)

Operating Income = $24,000

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