Hudson Co. reports the contribution margin income statement for 2017. If the com

Question

Hudson Co. reports the contribution margin income statement for 2017.

If the company raises its selling price to $320 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.

HUDSON CO. Contribution Margin Income Statement For Year Ended December 31, 2017 Sales (10,000 units at $300 each) $ 3,000,000 Variable costs (10,000 units at $240 each) 2,400,000 Contribution margin $ 600,000 Fixed costs 420,000 Pretax income $ 180,000

Explanation / Answer

1. contribution margin=Sales-Variable expenses

=(320-240)=$80 per unit.

2. contribution margin ratio= contribution margin/Sales

=(80/320)=25%

3.Breakeven point=Fixed cost/ contribution margin

=(420000/80)=5250 units.

4.Breakeven point=Fixed cost/ contribution margin ratio

=(420000/0.25)=$1,680,000.

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