Problem 3-17A Determining the break-even point and preparing a contribution marg

Question

Problem 3-17A Determining the break-even point and preparing a contribution margin income statement LO 3-1 Lucent Manufacturing Company makes a product that it sells for $75 per unit. The company incurs variable manufacturing costs of $30 per unit. Variable selling expenses are $9 per unit, annual fixed manufacturing costs are $240,000, and fixed selling and administrative costs are $165,000 per year. Determine the break-even point in units and dollars using each of the following approaches: a. Equation method. Break-even point in units Break-even point in dollars b. Contribution margin per unit. Contribution margin per unit Break-even point in units Break-even point in dollars

Explanation / Answer

Lucent Manufacturing Marginal Costing Details Amt per unit $ Total Amt $ Selling Price                       75.00 Variable Manufacturing Cost                       30.00 Variable Selling Expense                          9.00 Total Variable cost                       39.00 Unit Contribution margin                       36.00 Fixed costs Annual Fixed Manufacturing Cost          240,000.00 Fixed Selling & Admin Cost          165,000.00 Total Fixed Costs          405,000.00 a Assume Break even units =k So . K*36=405000 or, k=11250 So Break even units                 11,250.00 Unit sales price                       75.00 Break even sales $             843,750.00 b Unit Contribution margin                       36.00 Total Fixed Costs             405,000.00 Break even units=405000/36=               11,250.00 Unit sales price                       75.00 Break even sales $             843,750.00 c Contribution margin ratio=36/75= 48% Total Fixed Costs             405,000.00 Break even sales=405000/48%             843,750.00 Unit sales price                       75.00 Break even units=843750/75=               11,250.00 d Lucent Manufacturing Contribution margin Income statement at BEP sales Units sold               11,250.00 Details Amt $ Sales             843,750.00 Variable Manufacturing Cost @$30/unit             337,500.00 Variable Selling Expense@$9/unit             101,250.00 Total Variable cost             438,750.00 Contribution margin             405,000.00 Fixed costs Annual Fixed Manufacturing Cost             240,000.00 Fixed Selling & Admin Cost             165,000.00 Total Fixed Costs             405,000.00 Net Operating Income                              -

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.