Question

1. Cost-Volume Profit Analysis

Recline Company is planning to produce and sell 12,500 units of its only product at a unit price of $100. At this sales level Recline Company will generate $400,000 in total contribution margin and incur fixed costs of $25/unit.

a.  Calculate Recline’s contribution margin ratio.

Round answer to the nearest whole percentage (ex: 0.3456 = 35%)

__________%

b.  Calculate the break-even point in sales dollars for Recline.

Use your rounded answer from part a. above and then round final answer to the nearest dollar.

$_________

2. Cost-Volume Profit Analysis
Hailstorm Company sells a single product for $22 per unit. Variable costs are $14 per unit and fixed costs are $80,000 at an operating level of 7,000 to 12,000 units.

a. What is Hailstorm Company's break-even point in units?

______ units

b. How many units must be sold to earn $12,000 before income tax?

______ units

c. How many units must be sold to earn $13,000 after income tax, assuming a 35% tax rate?

______ units

3. Break-Even with Multiple Products
Warner Company has $189,200 of total fixed costs and sells products A and B with a product mix of 40% A and 60% B. Selling prices and variable costs for A and B result in contribution margins per unit of $11 and $7, respectively. Compute the break-even point.

Enter product mix answers in decimal form. Round weighted average unit contribution margin to two decimal places, if applicable.

Product	Product Mix	Contribution Margin per unit	Weighted average unit contribution margin
A	Answer	Answer	$ Answer
B	Answer	Answer	$ Answer
			$ Answer

Break-even point = ______ units

Answer 1

1. Contribution margin ratio

= Contribution margin /Sales

= 400,000/(12500*100)

= 32%

Breakeven point in sales dollars

= Fixed cost/Contribution margin ratio

= (25*12500)/32%

= 976,563

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