Question

Compute break-even point in dollars , contribution margin ratio, target net income sales
CUBS Inc. produces widgets. The widgets are sold for $10.00 per unit to wholesalers.
Unit variable cost are 70% of Sales. For the year 2019, management estimates the following revenues and costs.
	Sales	$7,500,000		Bonuses	325,000
	Manufacturing overhead -fixed	1,160,000		Rent	250,000
	Selling expenses - fixed	300,000		Meals & Entertainment	175,000
	SGA expenses - fixed	700,000		Travel Expenses	150,000
Instructions:
(a)	Compute the contribution margin ratio.   (Round to the nearest full percent.)
(b)	Compute the break-even point in dollars.
(c)	Determine the sales dollars required to earn net income of $675,000

Answer 1

Unit Contribution margin[$10.00 - ($10.00*70%)]	$3
Unit Selling price	$10
Contribution margin ratio	30%
Fixed Costs($1,160,000+300,000+700,000)	$21,60,000
Contribution margin ratio	30%
Break-even point in dollars($2,160,000/30%)	$72,00,000
Fixed Costs	$21,60,000
Target Income	$6,75,000
Total fixed cost+Target Income	$28,35,000
Contribution margin ratio	30%
Sales dollars required($2,835,000/30%)	$94,50,000

Answer 2

Requirement a
Fixed Costs
Manufacturing Overhead	1160000
Selling expenses	300000
SGA expenses	700000
Bonus	325000
Rent	250000
Meals & Entertainment	175000
Travel Expenses	150000
Total fixed costs	3060000
Sales	7500000
Variable cost	5250000
Contribution Margin	2250000
Contribution margin ratio	30%
(2,250,000/7,500,000)
Requirement b
Break even point in dollars	= Fixed costs/ Contribution margin ratio
	=3,060,000/30%
	=10,200,000
Requirement c
Required net income	675000
Add: Fixed Costs	3060000
Contribution Margin	3735000
Required sales dollars	12450000
(3,735,000/30%)