BASIC BREAK-EVEN CALCULATIONS Suppose that Adams Company sells a product for $16. Unit costs are as follows:

Question:

Direct materials $3.90 Direct labor 1.40 Variable overhead 2.10 Variable selling and administrative expense 1.60 Total fixed overhead is $52,000 per year, and total fixed selling and administrative expense is $37,950.

Required:

. Calculate the variable cost per unit and the contribution margin per unit.

. Calculate the contribution margin ratio and the variable cost ratio.

. Calculate the break-even units.
. Prepare a contribution margin income statement at the break-even number of units.
Exercise

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