Jammin Co. manufactures and markets several products. Management is considering the future of one product, electronic keyboards, that has not been as profitable as planned. Since this product is manufactured and marketed independently of the other products, its total costs can be precisely measured. Next year’s plans call for a $225 selling price per unit. The fixed costs for the year are expected to be $30,000, up to a maximum capacity of 700 units. Forecasted variable costs are $150 per unit.
Required
1. Estimate the keyboards’ break-even point in terms of (a) sales units and (b) sales dollars.
2. Prepare a CVP chart for keyboards like that in Exhibit 18.14. Use 700 keyboards as the maximum number of sales units on the horizontal axis of the graph, and $180,000 as the maximum dollar amount on the vertical axis.
3. Prepare a contribution margin income statement showing sales, variable costs, and fixed costs for keyboards at the break-even point.
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