This is my homework for Accounting, please help, and explain the steps to how yo

Question

This is my homework for Accounting, please help, and explain the steps to how you got answer... This is our notes for our midterm

                                                                                                           TOTAL            PER UNIT

                                                                                                                                    $                %

SALES                                                                                             $450,000         $ 20          100

LESS VARIABLE EXPENSES                                                           315,000               14            70

CONTRIBUTION MARGIN                                                             $135,000             $6             30

LESS FIXED EXPENSES                                                                 75,000

NET INCOME                                                                                    $60.000

1.

WHAT IS THE MONTHLY BREAK -EVEN POINT IN UNITS AND IN SALES DOLLARS?

2. WITHOUT RESORTING TO COMPUTATIONS, WHAT IS THE TOTAL CONTRIBUTION MARGIN AT THE BREAK - EVEN POINT?

3. HOW MANY UNITS WOULD HAVE TO BE SOLD EACH MONTH TO EARN A MINIMUM TARGET NET INCOME OF $18,000? PROVE YOUR ANSWER BY PREPARING A CONTRIBUTION INCOME STATEMENT AT THE TARGET LEVEL OF SALES.

Explanation / Answer

Hi,

Please find the answers as follows:

Part 1:

Break Even Point in Units = Fixed Cost/(Sales Price Per Unit - Variable Cost Per Unit)

= 75000/(20-14) = 12500 Units

Break Even Point in Sales = 12500*20 = 250000

Part 2:

Contribution at the Break Even Point should be equal to fixed cost, therefore contribution will be 75000

Part 3:

Sales = Fixed Cost + Profit/(Sales Price Per Unit - Variable Cost Per Unit) = (75000 + 18000)/(20 - 14) = 15500 Units

Thanks.

Income Statement Sales 310000 Variable Cost 217000 Contribution 93000 Fixed Cost 75000 Net Income 18000

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