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 $200 per unit. The company incurs variable manufacturing costs of $101 per unit. Variable selling expenses are $19 per unit, annual fixed manufacturing costs are $464,000, and fixed selling and administrative costs are $256,000 per year.

Required

Determine the break-even point in units and dollars using each of the following approaches:

1. Use the equation method.

2. Use the contribution margin per unit approach.

3. Prepare a contribution margin income statement for the break-even sales volume.

Complete this question by entering your answers in the tabs below.

Determine the break-even point in units and dollars using the equation method, the contribution margin per unit approach and the contribution margin ratio approach.

A.	Break-even point in units
	Break-even point in dollars
B.	Contribution margin per unit
	Break-even point in units
	Break-even point in dollars

• Req C

Prepare a contribution margin income statement for the break-even sales volume.

Richie Manufacturing Company

Contribution Margin Income Statement
Cost of goods sold
Fixed costs
Sales
Selling expenses
Variable costs
Net Income or Net Loss

Answer 1

Contribution margin = $200 - $101 - $19 = $80

Total fixed cost = $464,000 + $256,000 = $720,000

Breakeven point = $720,000 / $80 = 9,000 units

Breakeven point in dollars = $200 X 9,000 = $1,800,000

A.	Breakeven point in units	9,000
	Breakeven point in dollars	$1,800,000
B.	Contribution margin per unit	$80
	Breakeven point in units	9,000
	Breakeven point in dollars	$1,800,000

C.

Sales	$1,800,000
Variable cost	$1,080,000
Fixed cost	$720,000
Contribution margin	$720,000
Net operating income	$0