Ritchie Manufacturing Company makes a product that i sells for $170 per unit. Th

Question

Ritchie Manufacturing Company makes a product that i sells for $170 per unit. The company incurs variable manufacturing costs of $83 per unit. Variable selling expenses are $19 per unit, annual fixed manufacturing costs are $498,000, and fixed selling and administrative costs are $236,400 per year. Required Determine the break-even point in units and dollars using each of the following approaches: a. Use the equation method. b. Use the contribution margin per unit approach. c. Prepare a contribution margin income statement for the break-even sales volume. Complete this question by entering your answers in the tabs below. Req A to B Req C Determine the break-even point in units and dollars using the equation method, the contribution margin per unit approach and the contribution margin ratio approach. a. Break-even point in units Break-even point in dollars b. Contribution margin per unit Break-even point in units Break-even point in dollars

Explanation / Answer

Answer a Calculation of break even point in units and dollars using Equation Method Break even point in Units = Fixed costs / Contribution Margin per unit Fixed costs = $498000 + $236400 = $7,34,400 Contribution Margin per unit = Selling price per unit - Variable cost per unit = $170 - ($83+$19) = $68 Break even point in Units = $734400 / $68 = 10800 units Break even point in dollars = Break even point in Units * Selling price per unit = 10800 units * $170 = $18,36,000 Answer b Contribution Margin per unit $68.00 Break even point in units 10800 units Break even point in dollars $1,836,000.00 Answer c Contribution Margin Income Statement for the break even sales volume RITCHIE MANUFACTURING COMPANY Contribution Margin Income Statement Sales (10800 units * $170) $1,836,000 Less : Variable Costs - Manufacturing Cost (10800 units * $83) $896,400 - Selling Expenses (10800 units * $19) $205,200 Contribution Margin $734,400 Less : Fixed Costs - Manufacturing Cost $498,000 - Selling & Administrative Expense $236,400 Net Operating Income $0

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