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. (Do not round intermediate calculations. Round "Contribution margin" to 2 decimal places (i.e., .2345 should be entered as 23.45) and rest of the answers to nearest whole number.)

contribution margin ratio

break-even points in dollars

break-even points in units

d. Lucent manufacturing company

contribution margin income statement

Explanation / Answer

a) At Breakeven Total Revenue =Total cost       [fised +variable]

Breakeven point in units : [Let X be number of units sold]

              70X = (195000+334230) + (10+21) X

              70X = 529230+ 31X

               70x- 31X = 529230

                 39X = 529230

                   X (Number of units ) = 529230/39

                            = 13570 units

Break even point In Dollars = 13570*70 = $ 949900

b)contribution margin per unit

contribution margin per unit = 70 - 31 = 39 per unit

BEP in units =Fixed cost /contribution per unit

                     = 529230 / 39

                      = $ 13570 per unit

BEP in dollars = contribution per unit * BEP units

             = 39 * 13570

             = $ 529230

c)contribution margin ratio

Contribution margin ratio =contribuion per unit /selling price

                                 = 39 /70

                                 = .5571 or 55.71%

BEP in dollars = Fixed cost /CM ratio

               = 529230/ .5571

                =$ 949973.07

BEP in units =BEP in dollars /Selling price

           = 949973.07 / 70

         = $ 13571         (approx 13570 units)

d)

              

            

sales    (13570 *70) 949900 less:Variable manufacturing cost(21*13570) -284970 Variable selling cost      (10*13570) - 135700 contribution margin 529230 Less:Fixed manufacturing cost -195000 Fixed selling cost -334230 Net Income 0

Related Questions

Navigate

• Browse (All)
• Browse L
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.