In 2011, Hoffmann Company had a break-even point of $350,000 based on a selling price of $7

Question:

In 2011, Hoffmann Company had a break-even point of $350,000 based on a selling price of $7 per unit and fixed costs of $105,000. In 2012, the selling price and the variable cost per unit did not change, but the break-even point increased to $420,000.

Instructions

(a) Compute the variable cost per unit and the contribution margin ratio for 2011.

(b) Compute the increase in fixed costs for 2012.

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...