APPLY THE CONCEPTS: Break-Even Point in Units The break-even point can be expressed in terms of sales dollars or number of units. The break-even units tells us how many units must be sold so that operating income is $0. Assume that you are part of the accounting team for Schallheim Manufacturing. The company currently expects to sell 964 units for total revenue of $21,100 each month. Schallheim Manufacturing estimates direct materials costs of $3,150, direct labor costs of $4,200, variable overhead costs of $2,100, and variable selling and administrative costs of $1,050. Fixed costs of $6,600 are also expected, which includes fixed overhead and selling and administrative costs. Using this information, complete the contribution margin income statement shown below. Schallheim Manufacturing Contribution Margin Income Statement in J C] Contribution margin \" V D iLess: Fixed costs 1 y/ C] Oneratinn income $l l Schallheim Manufacturing is examining cost behavior patterns. Your recommendation is to first determine the breakeven point in units. First, calculate the contribution margin (CM) per unit (rounded to the nearest dollar). C Next, complete the formula below to determine the break-even units. Total Fixed Costs / Contribution Margin per Unit = Units APPLY THE CONCEPTS: Effect of Changes to Sales Price, Variable Costs and Fixed Costs Now consider each of the following scenarios for Schallheim Manufacturing. Calculate the contribution margin (CM) per unit, rounded to nearest dollar, and the new break-even point in units, rounded to the nearest whole unit, for each scenario separately. Scenario 1 Scenario 2 Scenario 3 Schallheim will dispose of a After some extensive market research, Schallheim Schallheim has been experiencing quality problems with a machine in the factory. The has determined that a sales price increase of $2 materials supplier. Changing suppliers will improve the depreciation on that equipment is per unit will not affect the sales volume and will quality of the product but will cause direct materials costs $500 per month. be effective immediately. to increase by $1 per unit. Break-even units: :1 _ _ _ _ Break-even units: :] units Break-even units: [:] units units