Break-Even Point in Units Chilimax Company plans to sell 3,500 pairs of shoes at

Question

Break-Even Point in Units Chilimax Company plans to sell 3,500 pairs of shoes at $60 each in the coming year. Variable cost is 35% of the sales price; contribution margin is 65% of the sales price. Total fixed cost equals $78,000 (includes fixed factory overhead and fixed selling and administrative expense) Required: 1. Calculate the sales revenue that Chillmax must make to break even by using the break-even point in sales equation Feedback 2. Prepare a contribution margin income statement based on the break-even point in sales dollars. Enter all amount as a positive number. Chillmax Company Contribution Margin Income Statement At Break-Even Point Total Sales Total variable cost Total contribution margin Total fixed cost Operating income

Explanation / Answer

1. Break even sales revenue :

Profit = Sales-Variable exp-fixed cost

0 = X-.35X-78000

Sales revenue = 120000

2. Contribution margin income statement :

Total Sales 120000 Total variable cost (120000*35%) 42000 Total contribution margin 78000 Total fixed cost 78000 Operating income 0

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