Q9SE - Horngren'S Financial And Managerial Accounting

Question

S20-9 Computing contribution margin, units and required sales to break even, units to achieve target profit 

Compute the missing amounts for the following table: 

Step-by-Step Solution

Answer

Answer

$$\begin{gathered} 1.\mathbf{A}\mathbf{=}\mathbf{\$}\mathbf{120}\mathbf{,}\mathbf{B}\mathbf{=}\mathbf{\$}\mathbf{3}\mathbf{,}\mathbf{000}\mathbf{,}\mathbf{C}\mathbf{=}\mathbf{\$}\mathbf{3}\mathbf{,}\mathbf{132} \\ \mathbf{2}\mathbf{.}\mathbf{A}\mathbf{=}\mathbf{60}\mathbf{\%}\mathbf{,}\mathbf{B}\mathbf{=}\mathbf{75}\mathbf{\%}\mathbf{,}\mathbf{C}\mathbf{=}\mathbf{60}\mathbf{\%} \\ \mathbf{3}\mathbf{.}\mathbf{A}\mathbf{=}\mathbf{610}\mathbf{,}\mathbf{B}\mathbf{=}\mathbf{220}\mathbf{,}\mathbf{C}\mathbf{=}\mathbf{1}\mathbf{,}\mathbf{200} \\ \mathbf{4}\mathbf{.}\mathbf{A}\mathbf{=}\mathbf{\$}\mathbf{122}\mathbf{,}\mathbf{000}\mathbf{,}\mathbf{B}\mathbf{=}\mathbf{\$}\mathbf{880}\mathbf{,}\mathbf{000}\mathbf{,}\mathbf{C}\mathbf{=}\mathbf{\$}\mathbf{6}\mathbf{,}\mathbf{264}\mathbf{,}\mathbf{000} \\ \mathbf{5}\mathbf{.}\mathbf{A}\mathbf{=}\mathbf{772}\mathbf{,}\mathbf{B}\mathbf{=}\mathbf{13}\mathbf{,}\mathbf{260}\mathbf{,}\mathbf{C}\mathbf{=}\mathbf{1}\mathbf{,}\mathbf{575} \end{gathered}$$

Step 1: Calculation of contribution margin per unit

	A	B	C
Sales price per unit	$1,400	(f) 4,900	$2,500
Less: Variable cost per unit	$700	$2,940	$1,250
Contribution per unit	$700	(g)1,960	(I) $1,250
Contribution margin ratio = Contribution margin/ net sales revenue	$700/$1,400 =50%	40%	(m) $1,250/$2,500 =50%   A B C Sales price per unit $1,400 (f) 4,900 $2,500 Less: Variable cost per unit $700 $2,940 $1,250 Contribution per unit $700 (g)1,960 (I) $1,250 Contribution margin ratio = Contribution margin/ net sales revenue $700/$1,400 =50% 40% (m) $1,250/$2,500 =50%

Step 2: Calculation of required units to breakeven

	A	B	C
Fixed costs	273,000	1,097,600	(k) 406,250
Contribution per unit	$700	$1,950	$1,250
Required sales in units = Fixed costs/ Contribution margin per unit	390	563	325

Step 3: Calculation of required sales dollars to breakeven

	A	B	C
Fixed costs	273,000	1,097,600	(k) 406,250
Contribution margin ratio = Contribution margin/ net sales revenue	$700/$1,400 =50%	40%	(m) $1,250/$2,500 =50%
Required sales in dollars = Fixed costs/ Contribution margin ratio	$546,000	$2,744,000	$812,500

Step 5: Calculation of required units to achieve target profit