Homework Answers
| Answer a | |||||
| Equation to calculate the break even sales units is as under, | |||||
| x = FC / (p - v) | |||||
| x = break even sales units = ? | |||||
| FC = Fixed cost = $468000 + $271200 = $7,39,200 | |||||
| p = Selling price per unit = $140 | |||||
| v = variable cost per unit = $73 + $11 = $84 | |||||
| x = $739200 / ($140 - $84) | |||||
| x = 13,200 units | |||||
| Break even point in units = 13200 units | |||||
| Break even point in sales dollars = 13200 units * $140 = $18,48,000 | |||||
| Answer b | |||||
| Equation to calculate the break even sales units using contribution margin approach is as under | |||||
| x = FC / Unit CM | |||||
| x = break even sales units = ? | |||||
| FC = Fixed cost = $468000 + $271200 = $7,39,200 | |||||
| Unit CM = Selling price per unit - Variable cost per unit = $140 - $84 = $56 | |||||
| x = $7,39,200 / $56 | |||||
| x = 13200 units | |||||
| Break even point in units = 13200 units | |||||
| Break even point in sales dollars = 13200 units * $140 = $18,48,000 | |||||
| Answer c | |||||
| Contribution Margin Income statement for break even sales volume | |||||
| RITCHIE MANUFACTURING COMPANY | |||||
| Contribution Margin Income Statement | |||||
| Sales [13200 units * $140] | $1,848,000.00 | ||||
| Less : Variable costs [13200 units * $84] | $1,108,800.00 | ||||
| Contribution Margin | $739,200.00 | ||||
| Fixed Cost | $739,200.00 | ||||
| Net Income | $0.00 | ||||
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