Use the following information for the Exercises below. [The following informatio
ID: 2538986 • Letter: U
Question
Use the following information for the Exercises below. [The following information applies to the questions displayed below.] Hudson Co. reports the contribution margin income statement for 2017. HUDSON CO. Contribution Margin Income Statement For Year Ended December 31, 2017 Sales (10,100 units at $300 each) $ 3,030,000 Variable costs (10,100 units at $240 each) 2,424,000 Contribution margin $ 606,000 Fixed costs 468,000 Pretax income $ 138,000 Exercise 18-16 Break-even LO P2 1. Compute Hudson Co.'s break-even point in units and. 2. Compute Hudson Co.'s break-even point in sales dollars. 1. Assume Hudson Co. has a target pretax income of $167,000 for 2018. What amount of sales (in dollars) is needed to produce this target income? 2. If Hudson achieves its target pretax income for 2018, what is its margin of safety (in percent)? (Round your answer to 1 decimal place.) Assume the company is considering investing in a new machine that will increase its fixed costs by $43,000 per year and decrease its variable costs by $8 per unit. Prepare a forecasted contribution margin income statement for 2018 assuming the company purchases this machine. 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. *please show all parts*
Explanation / Answer
Answer
A
Fixed cost
468000
B
Contribution per unit
60
C=A/B
Break Even in Units
7800
A
Break Even in Units
7800
B
Sale price per unit
300
C=AxB
Break Even point in sales dollars
$2340000
A
Contribution margin
606000
B
Sale Revenue
3030000
C=A/B
Contribution Ratio
20.00%
A
Target Pre-tax Income
167000
B
Fixed Cost
468000
C=A+B
Total contribution required
635000
D
Contribution Ratio
20.00%
E=C/D
Amount of Sales required
$3175000
A
Sales
3175000
B
Break Even Sales
2340000
C=A-B
Margin of Safety Sales
$835000
D=C/A
margin of Safety %
26.3%
Units
Amount
per unit
Sales
10100
300
3030000
(-) Variable cost
10100
232
2343200
Contribution margin
10100
68
$686,800
(-) Fixed cost
511000
Pretax Income
$175,800
A
Sales price
$320
B
variable cost
$240
C=A-B
Contribution per unit
$80
D=C/A
Contribution margin ratio
25.00%
E
Fixed Cost
$468000
F=E/C
Break Even in Units
5850
G=E/D
Break Even in Dollars
1872000
A
Fixed cost
468000
B
Contribution per unit
60
C=A/B
Break Even in Units
7800
A
Break Even in Units
7800
B
Sale price per unit
300
C=AxB
Break Even point in sales dollars
$2340000
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