Lucent Manufacturing Company makes a product that it sells for $70 per unit. The

Question

Lucent Manufacturing Company makes a product that it sells for $70 per unit. The company incurs variable manufacturing costs of $21 per unit. Variable selling expenses are $10 per unit, annual fixed manufacturing costs are $195,000, and fixed selling and administrative costs are $334,230 per year. Required: Determine the break-even point in units and dollars using each of the following approaches:

a. Equation method.

break-even point in units

break-even points in dollars

b. contribution margin per unit

contribution margin per unit

break-even points in units

break-even points in dollars

c. contribution margin ratio

contribution margin ratio

break-even points in dollars

break-even points in units

d. Lucent manufacturing company

contribution margin income statement

Explanation / Answer

break-even point in units Sales- Variable costs- Fixed costs= Profit (Net income) 70N-(21+10)N-(195000+334230)=0 39N =(195000+334230) =529230/39 =13570 Units break-even point in units 13570 break-even points in dollars 13570*70 =949900 contribution margin per unit =Fixed Cost/(Contribution margin per unit) =(195000+334230)/(70-(21+10)) 13570 units break-even points in dollars 13570*70 =949900 contribution margin ratio =+(70-31)/70 contribution margin ratio 55.714% break-even points in dollars 55.714%*Break even Point in dollars =529230 break-even points in dollars 949900 break-even point in units +949900/70 =13570 units contribution margin income statement Approch Sales Price Per Unit 949900 Variable Expense Less Manufacturing 21 284970 Less Selling 10 135700 Contribution Margin 529230 Fixed Cost fixed selling 195000 administrative costs 334230 Profit 0

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