In 2013, Manhoff Company had a break-even point of $229,000 based on a selling p

Question

In 2013, Manhoff Company had a break-even point of $229,000 based on a selling price of $5 per unit and fixed costs of S64,120. In 2014, the selling price and the variable cost per unit did not change, but the break-even point increased to S305,786. Compute the variable cost per unit and the contribution margin ratio for 2013. (Round Variable cost per unit to 2 decimal places, e.g. $2.25 and Contribution margin ratio to 0 decimal places, e.g. 20%.) Compute the increase in fixed costs for 2014. (Round answer to 0 decimal places, e.g. 1, 225.)

Explanation / Answer

2013

Break even point in sales dollar = $22900

selling price per unit = $5

Fixed Cost = $64120

Break even point in units = Fixed Cost /sales - variable Cost

Break even point in units = 229000/5 = 45800 units

45800 = 64120/5 - vc

45800*(5-vc) = 64120

229000 - 45800vc = 64120

229000-64120 = 45800vc

164880=45800vc

VC = 164880/45800 = $3.6

Contribution MArgin RAtio = contribution MArgin/selling price per unit

Contribution MArgin RAtio = 5-3.6/5 = 0.28 or 28%

2014

Increase in Break even = $305786

Sales price per unit = $5

VAriable cost per unit = $3.6

Break even point in unit = 305786/5 = 61157

Break even sales unit = Fixed cost /sales - variable cost

61157 = fc/5-3.6

61157x1.4 = fixed Cost

Fixed Cost =$85620

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