Required information [The following information applies to the questions display

Question

Required information [The following information applies to the questions displayed below.] Hudson Co. reports the contribution margin income statement for 2017. HUDSON co. Contribution Margin Income Statement For Year Ended December 31, 2017 Sales (11,500 units at $225 each) Variable costs (11,500 units at $180 each) Contribution margin Fixed costs Pretax income $2,587,500 2,070,000 517,500 360,000 $157,500 . Compute Hudson Co's break-even point in units and. . Compute Hudson Co.'s break-even point in sales dollars. 1. Break-even point 2. Break-even point units

Explanation / Answer

BREAK-EVEN POINT (in unit)                            = 8,000 UNITS

BREAK-EVEN POINT IN SALES DOLLARS   = $ 1,800,000

Working notes:

Break-even point in units = Fixed cost / Contribution per unit

Fixed cost                  = $360,000

Contribution per unit = Sales per unit-Variable cost per unit

                                   = $ 225- $180

                                    = $45

         $ 360,000 / $ 45 = 8,000 units

Break-even point in sales dollars = BEP units sales* Sales per unit

= 8,000 units * $225

= $ 1,800,000

PROOF:

Sales                           = 8,000* $ 225 = $ 1,800,000

Variable cost               = 8,000 *$ 180 =1,440,000

Contribution margin    = $ 360,000

Fixed cost                   = $ 360,000

Profit / Loss                = 0

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