A Company sells two types of lawn mower the fly-mo and the standard. The selling price of the Fly-mo is $188 and variable costs of $152.80. The Standard sells for $180 with the same variable cost.

Fixed costs are $255,840. The company sells the lawn mowers in equal proportions (i.e. in the same ratio).

1. What is break-even point in units (number of lawn mowers)?
2. What is break-even point in sales (in US$)?
3. Create a contribution income statement for break-even point.
4. How much would the variable cost per unit of the Standard have to change before it had the same break-even point as the Fly-mo?
5. How many units need to be sold if only Standards are sold with fixed costs of $316,800 and a profit of $36,800 is required?
6. After installing a more sophisticated costing system Slash & Burn realises that the fixed costs of only selling the Standard are $350,460. If the variable costs of the Standard decreased by 10% and the fixed costs then increase by 10%, what would be the new break-even point for the standard in units?
7. Why is contribution margin a useful tool for management accountants in decision-making situations like price setting and accepting or rejecting special orders?