Berry Company produces a single product. The projected income statement for the coming year is as follows

Berry Company produces a single product. The projected income statement for the coming year is as follows:
Sales (50,000 units @ $45) $2,250,000

Less: Variable costs 1,305,000

Contribution Margin $ 945,000

Less: Fixed costs 812,700

Operating Income $ 132,300

a. Compute unit margin and the units that must be sold to break even.

b. Suppose 30,000 units are sold above break even. What is the operating income?

c. Compute the contribution margin ratio and the breakeven point in dollars. Suppose that that revenue is $200,000 more than expected. What would the total operating income be?

 

What is the operating income if the revenue increases by $200,000?

SOLUTION PREVIEW

a. Compute unit margin and the units that must be sold to break even.

 

Answer: unit margin = $18.90; Units to break even= 43,000

 

Break-even point (in units) = Fixed cost                            .

                                               Contribution margin per unit

 

Contribution margin per unit = Contribution margin

                                                         No. of units

                                                = 945,000/50,000

                                                = $18.90

  

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