Hudson Co. reports the contribution margin income statement for 2015. HUDSON CO.

Question

Hudson Co. reports the contribution margin income statement for 2015. HUDSON CO. Contribution Margin Income Statement For Year Ended December 31, 2015 Sales (9,100 units at $225 each) $ 2,047,500 Variable costs (9,100 units at $135 each) 1,228,500 Contribution margin $ 819,000 Fixed costs 297,000 Pretax income $ 522,000 If the company raises its selling price to $225 per unit. 1. Compute Hudson Co.'s contribution margin per unit. 2. Compute Hudson Co.'s contribution margin ratio. 3. Compute Hudson Co.'s break-even point in units. 4. Compute Hudson Co.'s break-even point in sales dollars

Explanation / Answer

1) Contribution margin per unit = 225-135 = 90 per unit

2) Contribution margin ratio = 90*100/225 = 40%

3) Break even point = 297000/90 = 3300 units

4) Break even sales dollar = 297000/.40 = $742500

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