# |Income Statement |Sales Revenue|$2,250,000 |Variable Costs| | Purchases|$425,000 |Direct...

## Question:

 Income Statement Sales Revenue $2,250,000 Variable Costs Purchases$425,000 Direct labor $395,000$820,000 $1,430,000 Fixed Costs Selling$175,000 Administrative $110,000$285,000

The above is based on sales of 20,000 units.

Compute:

1. Contribution Margin

2. Selling price per unit

3. Variable labor cost per unit

4. Variable purchases cost per unit

5. Breakeven point in units and dollars

The contribution margin per unit is given by:

• = Total contribution margin / number of units sold
• {eq}= \dfrac{\$1,430,000}{20,000} {/eq} • =$71.5 per unit

The selling price per unit is given by:

• = Sales revenue / number of units sold
• {eq}= \dfrac{\$2,250,000}{20,000} {/eq} • =$112.5 per unit

The variable labor cost per unit is given by:

• = Total variable labor cost / number of units sold
• {eq}= \dfrac{\$395,000}{20,000} {/eq} • =$19.75 per unit

The variable purchases cost per unit is given by:

• = Total variable purchases cost / number of units sold
• {eq}= \dfrac{\$425,000}{20,000} {/eq} • =$21.25 per unit

The break-even point in units is given by:

• = Total fixed costs / contribution margin per unit
• {eq}= \dfrac{\$285,000}{\$71.5} {/eq}
• = 3,986 units

The contribution margin ratio is given by:

• = Contribution margin per unit / selling price per unit
• {eq}= \dfrac{\$71.5}{\$112.5} {/eq}
• = 63.56%

The break-even point in sales dollars is given by:

• = Total fixed costs / contribution margin ratio
• {eq}= \dfrac{\$285,000}{63.56\%} {/eq} • =$448,427