Executive officers of Norman Company are assessing the profitability of a potential new product. They expect that

Question:

Executive officers of Norman Company are assessing the profitability of a potential new product.
They expect that the variable cost of making the product will be $60 per unit and fixed manufacturing cost will be $720,000. The executive officers plan to sell the product for $80 per unit.
Required
Determine the break-even point in units and dollars using each of the following approaches:
a. Use the per unit approach.
b. Use the equation method.
c. Use the ratio approach.
d. Prepare a break-even graph to illustrate the cost-volume-profit relationships.
Contribution Margin
Contribution margin is an important element of cost volume profit analysis that managers carry out to assess the maximum number of units that are required to be at the breakeven point. Contribution margin is the profit before fixed cost and taxes...