required information use the following information for the exercises below. (algo) the following information…
required information use the following information for the exercises below. (algo) the following information applies to the questions displayed below. hudson company reports the following contribution margin income statement. hudson company contribution margin income statement for year ended december 31 sales (10,100 units at $300 each) variable costs (10,100 units at $240 each) contribution margin fixed costs income $ 3,030,000 2,424,000 606,000 468,000 $ 138,000 exercise 18-11 (algo) computing break - even units and sales lo p2 question 1. what is the break - even point in units? 2. what is the break - even point in sales dollars?
Answer
Explanation:
Step1: Calculate contribution margin per unit
Contribution margin per unit = Selling price per unit - Variable cost per unit. Given selling price per unit = $300 and variable cost per unit = $240. So, contribution margin per unit = $300 - $240=$60.
Step2: Calculate break - even point in units
The formula for break - even point in units is $\text{Break - even units}=\frac{\text{Fixed costs}}{\text{Contribution margin per unit}}$. Fixed costs = $468,000 and contribution margin per unit = $60. So, $\text{Break - even units}=\frac{468000}{60}=7800$ units.
Step3: Calculate break - even point in sales dollars
The formula for break - even point in sales dollars is $\text{Break - even sales}=\text{Break - even units}\times\text{Selling price per unit}$. Break - even units = 7800 and selling price per unit = $300. So, $\text{Break - even sales}=7800\times300 = 2340000$ dollars.
Answer:
- 7800 units
- $2,340,000