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

Question

Break-Even Point in Units Chillmax Company plans to sell 3,500 pairs of shoes at $60 each in the coming year. Unit variable cost is $21 (includes direct materials, direct labor, variable factory overhead, and variable selling expe). Total fixed cost equals $78,000 (includes fixed factory overhead and fixed selling and administrative expense) Required: 1. Calculate the break-even pairs of shoes. 2,000 Feedback 2. Check your answer by preparing a contribution margin income statement based on the break-even units. Enter all amounts 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

Contribution margin=Sales-Variable expenses

=(60-21)=$39

Hence breakeven units=Fixed costs/Contribution margin

=(78000/39)=2000 units.

Sales(2000*60) $120,000 Total variable cost(2000*21) $42000 Total Contribution margin $78000 Total fixed costs $78000 Operating income 0.

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