Question

E5.13 (LO 3,4), AP Billings Company has the following information available for September 2020. Unit selling price of video game consoles Unit variable costs Total fixed costs Units sold $ 400 $ 280 $54,000 600 Instructions a. Compute the unit contribution margin b. Prepare a CVP income statement that shows both total and per unit amounts. c. Compute Billings' break-even point in units d. Prepare a CVP income statement for the break-even point that shows both total and per unit amounts

Answer 1

1. Unit contribution margin = Unit selling price - Unit variable costs = $400 - $280 = $120

2.

CVP Income Statement
	Per Unit	Total
Sales (600 units)	400	240000
Less: Variable costs	280	168000
Contribution margin	120	72000
Less: Fixed costs	90	54000
Net income $	30	18000

3. Break-even point in units = Total fixed costs/Contribution margin per unit = $54000/$120 = 450 units

4.

CVP Income Statement
	Per Unit	Total
Sales (450 units)	400	180000
Less: Variable costs	280	126000
Contribution margin	120	54000
Less: Fixed costs	120	54000
Net income $	0	0