If the company raises its selling price to $240 per unit. 1. Compute Hudson Co.\

Question

If the company raises its selling price to $240 per unit.

1. Compute Hudson Co.'s contribution margin per unit.
2. Compute Hudson Co.'s contribution margin ratio.
3. Compute Hudson Co.'s break-even point in units.
4. Compute Hudson Co.'s break-even point in sales dollars.

Use the following information for the Exercises below. 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 (9,600 units at $225 each) Variable costs (9,600 units at $180 each) Contribution margin Fixed costs Pretax income $2,160,000 1,728,000 $ 432,000 324,000 $108,000

Explanation / Answer

Req 1: Contribution margin per unit: Selling price per unit 225 Less: variable cost 180 Contribution margin per unit: 45 Req 2: Contribution margin ratio: Contribution/ Selling price *100 $ 45 / 225 *100 = 20% Req 3: Break even in Units: Fixed cost / Contribution margin per unit $ 324,000 /45 = 7200 units Req 4: Break even in $:    Fixed Cost / Contribution margin ratio $ 324,000 /20% = $ 1620,000

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