Sunshine Inc. sells a single product. The company’s most recent income statement

ID: 2593758 • Letter: S

Question

Sunshine Inc. sells a single product. The company’s most recent income statement is given below:

Answer each of the following questions and show all work:

A.) Contribution margin per unit is:

B.) If sales are doubled to $240,000, total variable costs will equal:

C.) If sales are doubled to $240,000, total fixed costs will equal:

D.) If Sunshine is past the breakeven point and 10 more units are sold, profits will increase by:

E.) Calculate how many units must be sold to break even:

Sales (4000 units) $ 120,000 Less variable expenses $ (68,000) Contribution margin $ 52,000 Less fixed expenses $ (40,000) Net Income $ 12,000

A. Contribution per unit = $52000/4000

= $13 per unut

B. if sales double variable cost shall also double

Variable cost = $68000*2 = $136000

C. Fixed cost remains the same at any level of sales. Hence fixed cost shall remain the same at $40000

D. At breakeven profit is zero i.e. fixed cost is fully recovered.After breakeven point, profit equals the contribution on extra unuts sold

Profit will increase by 10*$13 = $130

E. Break even units = Fixed cost / contribution per unit

= $40000/13

= 3077 units

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