Contribution and Breakeven: Concept Connection Examples 14-4 and 14-5 (pages 605

Question

Contribution and Breakeven: Concept Connection Examples 14-4 and 14-5 (pages 605 and 606) 10. Cranberry Wood Products Inc. spends an average of $9.50 in labor and $12.40 in materials on e aterials on ev- her costs are fixed ery unit it sells. Sales commissions and shipping amount to another $3.10. All other costs are fi and add up to $140,000 per month. The average unit sells for $32.00 a. What are Cranberry's contribution and contribution margin? b. What is the firm's breakeven point in units? c. Calculate the dollar breakeven point in two ways. d. Sketch the breakeven diagram

Explanation / Answer

Ans10 a) Contribution= Sales- Variable cost Particular Amount Sales 32 Less: Labour 9.5 Less: Material 12.4 Less: Sales commission 3.1 Contribution per unit 7 Contribution margin= 32-25/32 0.21875 or 21.87% b) Break even point= fixed cost/ contribution per unit 140000/7 20000 Unit c) Break even point in doller=20000*32=640000

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