### Sunn Company Financial AnalysisSunn Company manufactures a single product that is sold for $130 per unit. The variable cost per unit is $104, and the company's annual fixed costs total $429,000. Below are the calculations necessary to assess the company’s financial status:#### (a) Compute the Company's Contribution Margin per Unit- **Sales Price per Unit**: $130- **Variable Cost per Unit**: $104The contribution margin per unit is calculated by subtracting the variable cost per unit from the sales price per unit:\[ \text{Contribution Margin} = \text{Sales Price per Unit} - \text{Variable Cost per Unit} = $130 - $104 = \text{Contribution Margin} \]#### (b) Compute the Company's Contribution Margin Ratio- **Numerator**: Contribution Margin- **Denominator**: Sales Price per UnitThe contribution margin ratio is calculated by dividing the contribution margin by the sales price per unit:\[ \text{Contribution Margin Ratio} = \frac{\text{Contribution Margin}}{\text{Sales Price per Unit}} \]This ratio expresses how much of each sales dollar contributes to covering fixed costs and generating profit.#### (c) Compute the Company's Break-Even Point in Units- **Numerator**: Annual Fixed Costs- **Denominator**: Contribution MarginThe break-even point in units is found by dividing the annual fixed costs by the contribution margin:\[ \text{Break-Even Units} = \frac{\text{Annual Fixed Costs}}{\text{Contribution Margin}} \]This calculation indicates the number of units that need to be sold to cover all fixed and variable costs.#### (d) Compute the Company's Break-Even Point in Dollars of Sales- **Numerator**: Annual Fixed Costs- **Denominator**: Contribution Margin RatioThe break-even point in dollars is calculated by dividing the annual fixed costs by the contribution margin ratio:\[ \text{Break-Even Dollars} = \frac{\text{Annual Fixed Costs}}{\text{Contribution Margin Ratio}} \]This value represents the amount of sales revenue required to break even.By performing these calculations, Sunn Company can better understand the financial dynamics of its product sales and make informed business decisions.

Formula: Contribution margin per unit = Selling price per unit - Variable cost per unit

Sunn Company manufactures a single product that sells for $130 per unit and whose variable costs are $104 per unit. The company's annual fixed costs are $429,000. |(a) Compute the company's contribution margin per unit. Contribution margin (b) Compute the company's contribution margin ratio. Numerator: Denominator: Contribution Margin Ratio %3D Contribution morgin rntio

Sunn Company manufactures a single product that sells for $130 per unit and whose variable costs are $104 per unit. The company's annual fixed costs are $429,000. |(a) Compute the company's contribution margin per unit. Contribution margin (b) Compute the company's contribution margin ratio. Numerator: Denominator: Contribution Margin Ratio %3D Contribution morgin rntio

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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