
Concept Introduction:
Breakeven point-
Breakeven point is the point where total revenues are equal to total costs. Total cost includes fixed costs as well as variable costs. It is calculated as follows-
Requirement 1-:
To compute:
Break even points in sales dollars.

Answer to Problem 4APSA
Explanation of Solution
Given,
- Fixed costs = $250,000
- Sales = $1,000,000
- Contribution margin = $200,000 First we need to find contribution margin ratio-
Breakeven point is calculated as follows-
Conclusion:
Thus, breakeven point in sales dollars is calculated.
Concept Introduction:
Breakeven point-
Breakeven point is the point where total revenues are equal to total costs. Total cost includes fixed costs as well as variable costs. It is calculated as follows-
Requirement 2-:
To compute:
Break even points in sales dollars.

Answer to Problem 4APSA
Explanation of Solution
First we need to find revised variable costs-
Then, we need to find revised contribution margin-
Contribution margin ratio is calculated as follows-
Breakeven point is calculated as follows-
Conclusion:
Thus, breakeven point in sales dollars is calculated.
Concept Introduction:
Contribution margin income statement-
It is a statement wherein all the variable costs are deducted from the sales to get the contribution margin and after getting contribution margin, fixed expenses are deducted from contribution margin to get net income or loss.
Requirement 3-:
To prepare:

Answer to Problem 4APSA
ASTRO Company | |
Particulars | Amount ($) |
Sales | 1,000,000 |
Variable costs | (400,000) |
Contribution margin | 600,000 |
Fixed costs | (450,000) |
Net income | 150,000 |
Explanation of Solution
First we need to find revised fixed costs-
Then, we need to find revised variable costs
Then, we need to find revised contribution margin-
Net income is calculates as follows-
Conclusion:
Thus, contribution margin income statement is prepared.
Concept Introduction:
Breakeven point-
Breakeven point is the point where total revenues are equal to total costs. Total cost includes fixed costs as well as variable costs.
Requirement 4-:
To compute:
Break even points in sales dollars and in sales units to earn a targeted profit

Answer to Problem 4APSA
Explanation of Solution
- Breakeven point in sales dollars-
First we need to find revised variable costs-
Then, we need to find revised contribution margin-
Contribution margin ratio is calculated as follows-
Breakeven point in sales dollars is calculated as under-
- Breakeven point in sales units-
Contribution margin per unit is calculated as under-
Breakeven point in sales units is calculated as follows-
Conclusion:
Thus, breakeven point in sales units and sales dollars is calculated.
Concept Introduction:
Contribution margin income statement-
It is a statement wherein all the variable costs are deducted from the sales to get the contribution margin and after getting contribution margin, fixed expenses are deducted from contribution margin to get net income or loss.
Requirement 5-:
To prepare:
Forecasted contribution margin income statement.

Answer to Problem 4APSA
ASTRO Company | |
Forecasted contribution margin income statement | |
Particulars | Amount ($) |
Sales | 1,083,350 |
Variable costs | (433,340) |
Contribution margin | 650,010 |
Fixed costs | (450,000) |
Net income | 200,010 |
Explanation of Solution
Net income is calculated as follows-
Conclusion:
Thus, contribution margin income statement is prepared.
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Chapter 21 Solutions
Connect Access Card For Fundamental Accounting Principles
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