Exercise 21-12 Income reporting and break-even analysis LO C2
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Blanchard
Company manufactures a single product that sells for $180 per unit and
whose total variable costs are $135 per unit. The company’s annual fixed
costs are $562,500. 12,500 units were sold.
|
| (1) | Prepare a contribution margin income statement for Blanchard Company at the break-even point.
Explanation:
(1)
| Sales: (12,500 × $180) = $2,250,000 |
| Variable costs: (12,500 × $135) = $1,687,500 |
| Contribution margin: (12,500 × $45) = $562,500 |
(2)
| Sales (in dollars) to break even with increased fixed costs |
| | | (Original fixed costs + Additional fixed costs) |
| Break-even | = |
|
| | | Contribution margin ratio |
| | = | ($562,500 + $135,000) / 25% = $2,790,000 |
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