ompute the break-even point in dollar sales for each product. Henna Company produces and sells two products, Carvings and Mementos. It manufactures these products in separate factories and markets them through different channels. They have no shared costs. This year, the company sold 42,000 units of each product. Income statements for each product follow. Carvings Mementos Sales $ 747,600 $ 747,600 Variable costs 523,320 149,520 Contribution margin 224,280 598,080 Fixed costs 108,280 482,080 Income $ 116,000 $ 116,000
ompute the break-even point in dollar sales for each product. Henna Company produces and sells two products, Carvings and Mementos. It manufactures these products in separate factories and markets them through different channels. They have no shared costs. This year, the company sold 42,000 units of each product. Income statements for each product follow. Carvings Mementos Sales $ 747,600 $ 747,600 Variable costs 523,320 149,520 Contribution margin 224,280 598,080 Fixed costs 108,280 482,080 Income $ 116,000 $ 116,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Compute the break-even point in dollar sales for each product.
Henna Company produces and sells two products, Carvings and Mementos. It manufactures these products in separate factories and markets them through different channels. They have no shared costs. This year, the company sold 42,000 units of each product. Income statements for each product follow.
| Carvings | Mementos | |
|---|---|---|
| Sales | $ 747,600 | $ 747,600 |
| Variable costs | 523,320 | 149,520 |
| Contribution margin | 224,280 | 598,080 |
| Fixed costs | 108,280 | 482,080 |
| Income | $ 116,000 | $ 116,000 |
Transcribed Image Text:Contribution Margin Ratio
Numerator:
Break-Even Point in Dollars
Numerator:
Contribution Margin Ratio
Break-Even Point in Dollars
1
1
1
1
1
1
PRODUCT CARVINGS
Denominator:
Denominator:
PRODUCT MEMENTOS
11
=
11
=
Contribution margin ratio
Break-even point in dollars
Contribution margin ratio
Break-even point in dollars
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Follow-up Question
Assume that the company expects sales of each product to decline to 25,000 units next year with no change in unit selling price. Prepare a contribution margin income statement for the next year (as shown above with columns for each of the two products).
Transcribed Image Text:Contribution margin
Income (loss)
Units
HENNA COMPANY
Contribution Margin Income Statement
Carvings
$ Per unit
$
Total
0
0
Mementos
$ Per unit
$
$
Total
0 $
0
0 $
Total
0
0
0
0
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