Question 16 n 2016 Manhoff Company had a breakeven point of

Question 16 n 2016, Manhoff Company had a break-even point of $264,000 based on a seling price of $8 per unit and foxed costs of $167,000. In 2017, the seling price and the variatle costs per unit did not change, but the break-even point increased to $402,000. Compute the variable costs per unit and the contribution margin ratio for 2016. CRound Variable cest per unit to 2 decimal pleces, e.g. 2.25 and Contribution margin ratio to o decimal places, eg. z0.) Contributon margin ratio Compure the increase in fixed costs for 2017. (Round answer to O decimal places, eg. 1,225.) tncrease in fixed cost Click if you would ike to Show Work for this questions Open Show Work

Solution

Answer a.

Breakeven Point = Fixed Costs / Contribution Margin Ratio
$264,000 = $167,000 / Contribution Margin Ratio
Contribution Margin Ratio = 0.63
Contribution Margin Ratio = 63%

Contribution Margin Ratio = (Selling Price - Variable Costs per unit) / Selling Price
0.63 = ($8 - Variable Costs per unit) / $8
$5.04 = $8 - Variable Costs per unit
Variable Costs per unit = $2.96

Answer b.

Selling Price = $8
Variable Costs per unit = $2.96
Contribution Margin Ratio = 63%
Breakeven Point = $402,000

Breakeven Point = Fixed Costs / Contribution Margin Ratio
$402,000 = Fixed Costs / 0.63
Fixed Costs = $253,260