LO34 Contribution Margin Income Statement and Breakeven Anal

LO3,4 Contribution Margin Income Statement and Breakeven Analysis E6A. Using the data in the contribution margin income statement for Broadway, Inc., that follows, calculate (a) selling price per unit, (b) variable costs per unit, and (c) break even point in units and in sales dollars. Broadway, Inc. Contribution Margin Income Statement For the Year Ended December 31 Sales (20,000 units) Less variable costs: $16,000,000 Cost of goods sold Selling, administrative, and general Total variable costs $8,000,000 4,000,000 12,000,000 Contribution margin 4,000,000 $1,200,000 800,000 Selling, administrative, and general 2,000,000 2,000,000

Solution

a Selling price per unit = 16000000/20000= 800 b Variable cost per unit = 12000000/20000= 600 c Break even point in units = Total fixed costs/Unit contribution margin = 2000000/(800-600)= 10000 Break even point in sales dollars = 10000*800= 8000000