Exercise 18-9 Contribution margin and break-even LO P2 Blanchard Company manufac

Question

Exercise 18-9 Contribution margin and break-even LO P2

Blanchard Company manufactures a single product that sells for $130 per unit and whose total variable costs are $104 per unit. The company’s annual fixed costs are $429,000.

(a) Compute the company's contribution margin per unit. Sales per unit $130 per unit Less: Variable cost per unit 104 per unit Contribution margin $26 per unit (b) Compute the company's contribution margin ratio. Choose Numerator: / Choose Denominator: = Contribution Margin Ratio / = Contribution margin ratio 0 (c) Compute the company's break-even point in units. Choose Numerator: / Choose Denominator: = Break-Even Units / = Break-even units 0 (d) Compute the company's break-even point in dollars of sales. Choose Numerator: / Choose Denominator: = Break-Even Dollars / = Break-even dollars 0

Explanation / Answer

(b) Contribution margin ratio = Contribution margin per unit / Sales per unit = $26 / $130 = 20%

(c) Break-even units = Fixed costs / Contribution margin per unit = $429,000 / $26 = 16,500 units

(d) Break-even dollars = Fixed costs / Contribution margin ratio = $429,000 / 20% = $2,145,000

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