Chapter 5, Problem 5.12E

In 2016. Manhoff Company had a break-even point of $350,000 based on a selling price of $5 per unit and fixed costs of $112,000. In 2017, the selling price and the variable costs per unit did not change, but the break-even point increased to $420,000.

Instructions

(a) Compute the variable costs per unit and the contribution margin ratio for 2016.

(b) Compute the increase in fixed costs for 2017.