Problem 2 (4 points each = 16 points) Given the following Income statement for A

Question

Problem 2 (4 points each = 16 points) Given the following Income statement for ABC company, answer the following questions. Show your work. Sales (10,000 units sold) Less V.C. CM Less F.C Net Income (profit) $150,000 80,000 70,000 50,000 $20,000 A. What is the Contribution Margin per unit? B. What is the Contribution Margin ratio? (take to nearest %) C. What is the Break even point in units? (take to nearest unit) D. How many units would need to be sold to make a total net income of $120,000? (take to nearest unit)

Explanation / Answer

1.Contribution margin per unit=(70,000/10,000)=$7/unit

2.Contribution margin ratio=Contribution margin/Sales

=(70,000/150,000)=47%

3.Breakeven =Fixed costs/Contribution margin

=(50,000/7)=7143 units

4.Target Contribution margin=Fixed costs+Target net income

=(50000+120000)=$170,000

hence units to be sold=(170,000/7)=24286 units

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