Question

You have been provided with the following information regarding the Closure Manufacturing Company:

Sales Price	$50
Variable manufacturing costs per unit	$24
Fixed manufacturing costs per unit	$12
Variable marketing costs per unit	$ 6
Fixed administrative costs per unit	$ 3

This information is based on forecasted sales of 33,000 units.

I wanted to know if these answers are correct?

1. What is the expected operating profit for the upcoming year? 165,000
2. What is the breakeven point in dollars? 1,237,500
3. How much in sales dollars is required to generate an operating profit of $275,000? 1,925,000

Answer 1

1	Income statement	Amount	Per unit
	Sales revenue	1650000	50
Less	Variable expense
	Variable cost of goods sold	792000	24
	Variable selling and admin expense	198000	6
	Total variable expense	990000	30
	Contribution margin	660000	20	0.4
Less	Fixed cost
	Fixed manufacturing expense	396000
	Fixed Admin expense	99000
	Total fixed expenses	495000
	Net operating income	165000
2	Breakeven in Dollars = Fixed cost / contribution margin ratio
	Fixed cost	495000
	Contribution margin ratio	0.4
	Breakeven in dollars	1237500
3	Sales in dollars = (Fixed cost + net operating profit)/ Contribution margin ratio
	Fixed cost	495000
	Net operating profit	275000
		770000
	Contribution margin ratio	0.4
	Sales in dollars required	1925000