Zenith Tools Ltd. has fixed operating costs of $500,000 per year and variable costs of $6.80 per unit. The product is sold at $11.80 per unit, resulting in a contribution margin of $5.00 per unit ($11.80 Full production capacity is 180,000 units per year. a. Compute the break-even point in: (1) Sales dollars (2) Units $6.80). b. Compute the number of units the company must sell to achieve a net income of $250,000.

Zenith Tools Ltd. has fixed operating costs of $500,000 per year and variable costs of $6.80 per unit. The product is sold at $11.80 per unit, resulting in a contribution margin of $5.00 per unit ($11.80 Full production capacity is 180,000 units per year. a. Compute the break-even point in: (1) Sales dollars (2) Units $6.80). b. Compute the number of units the company must sell to achieve a net income of $250,000.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter16: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 36P: Faldo Company produces a single product. The projected income statement for the coming year, based...

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Ritchie Manufacturing Company makes a product that it sells for $150 per unit. The company incurs variable manufacturing costs of $60 per unit. Variable selling expenses are $18 per unit, annual fixed manufacturing costs are $ 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.