Lucent Manufacturing Company makes a product that it sells for $75 per unit. The
ID: 2510849 • Letter: L
Question
Lucent Manufacturing Company makes a product that it sells for $75 per unit. The company incurs variable manufacturing costs of $30 per unit. Variable selling expenses are $9 per unit, annual fixed manufacturing costs are $240,000, and fixed selling and administrative costs are $165,000 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 point in dollars b. Contribution margin per unit. Contribution margin per unit Break-even point in units Break-even point in dollars LUCENT MANUFACTURING COMPANY Contribution Margin Income StatementExplanation / Answer
a) Calculation of break even point in unit sales: Equation method px=vx+FC where p= Selling price= 75 v= variable cost per unit= 30+9=39 FC= fixed cost= 240000+165000=405000 x= break even point in unit sales 75*x=39*x+405000 36*x=405000 x=405000/36=11250 Break even point in unit sales= 11250 units Calculation of break even point in dollar sales: Break even point in dollar sales= vx+FC = (39*11250)+405000=843750 Break even point in dollar sales=$843750 b) Calculation of break even point in units: Contribution per unit= Selling price- variable cost per unit = 75-39=$36 Break even sale in units= Fixed cost/ contribution per unit = 405000/36=11250 Break even point in unit sales= 11250 units Calculation of break even point in dollars: Break even point in dollar sales= Break even point in units* selling price =11250*75=$843750 Break even point in dollar sales=$843750 c) Contribution Margin Income statement Particulars Amount($) Sales(11250*75) 843750 Less: Variable Cost(11250*39) 438750 Contri bution(843750-483750) 405000 Less: Fixed Cost(240000+165000) 405000 Operating Profit 0
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