Basic Advanced Sales $3,000,000 $2,000,000 Variable Expenses: Direct Materials $
ID: 2338957 • Letter: B
Question
Basic
Advanced
Sales
$3,000,000
$2,000,000
Variable Expenses:
Direct Materials
$800,000
$600,000
Direct Labor
$600,000
$300,000
Sales Commissions
$150,000
$200,000
Total Variable Expenses
$1,550,000
$1,100,000
Contribution Margin
$1,450,000
$900,000
Traceable Fixed Costs:
Manufacturing Overhead
$488,314
$781,848
Selling & Administrative
$150,000
$200,000
Total Traceable Fixed Costs
$638,314
$981,848
Segment Contribution Margin
$811,686
-$81,848
5. Using your contribution format segmented income statement calculate the break-even point in dollar sales for the Advanced model.
Basic
Advanced
Sales
$3,000,000
$2,000,000
Variable Expenses:
Direct Materials
$800,000
$600,000
Direct Labor
$600,000
$300,000
Sales Commissions
$150,000
$200,000
Total Variable Expenses
$1,550,000
$1,100,000
Contribution Margin
$1,450,000
$900,000
Traceable Fixed Costs:
Manufacturing Overhead
$488,314
$781,848
Selling & Administrative
$150,000
$200,000
Total Traceable Fixed Costs
$638,314
$981,848
Segment Contribution Margin
$811,686
-$81,848
Explanation / Answer
5 Contribution Margin ratio = Contribution Margin/Sales = 900000/2000000 = 45% Break-even point in dollar sales = Traceable Fixed Costs/ Contribution margin ratio = 981848/45%= $2181884
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