Ritchie Manufacturing Company makes a product that it sells for $150 per unit. The company incurs variable manufacturing costs of S60 per unit. Variable selling expenses are $18 per unit, annual fixed manufacturing costs are S 480,000, and fixed selling and administrative costs are $240, 000 per year. Required: Determine the break-even point in units and dollars using each of the following approaches: a. Use the equation method. b. Use the contribution margin per unit approach. c. Use the contribution margin ratio approach. d. Confirm your results by preparing a contribution margin income statement in excel for the break-even sales volume.
Ritchie Manufacturing Company makes a product that it sells for $150 per unit. The company incurs variable manufacturing costs of S60 per unit. Variable selling expenses are $18 per unit, annual fixed manufacturing costs are S 480,000, and fixed selling and administrative costs are $240, 000 per year. Required: Determine the break-even point in units and dollars using each of the following approaches: a. Use the equation method. b. Use the contribution margin per unit approach. c. Use the contribution margin ratio approach. d. Confirm your results by preparing a contribution margin income statement in excel for the break-even sales volume.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Step 1: Define variable costs
VIEWStep 2: (a) Calculation of the Break-even point by using the equation method.
VIEWStep 3: (b) Calculation of the Break-even point by using the contribution margin per unit approach.
VIEWStep 4: (c) Calculation of the Break-even point by using the contribution margin ratio approach :
VIEWStep 5: (d) Preparation of contribution margin income statement
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