Question

Problem 11-28 Determining the break-even point and preparing a contribution margin income statement LO 11-5 Ritchie Manufacturing Company makes a product that it sells for $140 per unit. The company incurs variable manufacturing costs of $61 per unit. Variable selling expenses are $16 per unit, annual fixed manufacturing costs are $380,000, and fixed selling and administrative costs are $281,500 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 "erences Complete this question by entering your answers in the tabs below. Reg A to B Reqc Prepare a contribution margin income statement for the break even sales volume. RITCHIE MANUFACTURING COMPANY Contribution Margin Income Statement

Answer 1

Solution A & B:

Let breakeven point = X units

Contribution margin per unit = $140 - ($61 + $16) = $63 per unit

Fixed expenses = $380,000 + $281,500 = $661,500

At breakeven point, contribution margin = Fixed costs

= $63X = $661,500

X = 10500 units

Breakeven point in dollars = Break even units * Selling price per unit = 10500 * $140 = $1,470,000

Break even point = Fixed costs / CM per unit = $661,500 / $63 = 10500 units

CM ratio = $63 / $140 = 45%

Breakeven point in sales dollar = Fixed costs / CM ratio = $661,500 / 45% = $1,470,000

Solution C:

RITCHIE Manufacturing company
Contribution margin income statement
Particulars	Amount
Sales revenue	$1,470,000.00
Variable expenses	$808,500.00
Contribution margin	$661,500.00
Fixed expenses	$661,500.00
Net operating income	$0.00