2. Using thefollowing Income Statement for ABC’s Company, compute thefirm’s brea

Question

2.         Using thefollowing Income Statement for ABC’s Company, compute thefirm’s breakeven point.

           Sales (30,000units)                 $150,000

           Variablecosts                           100,800

           ContributionMargin                 $ 49,200

           Fixed Manufacturing Costs          24,000

           OperatingIncome                    $ 25,200

           Interest                                       18,000

           Earnings beforetaxes               $    7,200

           Taxes(30%)                                 2,160

           NetIncome                             $    5,040

           The breakeven point is:

(a)               4,800 units

(b)              14,634 units

(c)               7,142 units

(d)              18,000 units

Explanation / Answer

hope this helps...

1. Sales units= (fixed costs + net income) / contributionmargin

Or

Sales $ = (fixed costs + net income) / contribution marginratio

2. Sales units= (fixed costs + net income) / contributionmargin

Or

Sales $ = (fixed costs + net income) / contribution marginratio

At break even, NI = 0$, Therefore

X = (24,000+0)/cm

CM = Sales – Variable Cost 150000-100800=49200

Cm/u = cm/units 51600/30000=$1.64/unit

X=24000/1.64 = 14634 (b)

15000=$30000+0/CM CMr=2   (b)

4. Sales units= (fixed costs + net income) / contributionmargin

5000 = $20,000 / cm = 4$ Sales – VC = CM, x - .50 =4, x= 4.50 (d)

5.

Sales units= (fixed costs + net income) / contributionmargin

20,000 = (x) / cm

Cm = sales –vc 4.00 – 2.50 = 1.50

20,000=x/1.50, x=30,000 (c)

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