APPLY THE CONCEPTS: Calculate the break-even point in sales dollars for Starr Computing

Further analysis of Starr Computings fixed costs revealed that the company actually faces annual fixed overhead costs of $9,800 and annual fixed selling and administrative costs of $4,200. Variable cost estimates are correct: direct materials cost, $8.00 per unit; direct labor costs, $10.00 per unit; and variable overhead costs, $2.00 per unit. At this time, the selling price of $40 will not change. Complete the following formulas for the revised fixed costs. Enter the ratio as a percentage.

Contribution Margin per Unit

=

$fill in the blank c3bfc103a02ff97_1

$fill in the blank c3bfc103a02ff97_2

=

$fill in the blank c3bfc103a02ff97_3

Contribution Margin Ratio	=	$fill in the blank c3bfc103a02ff97_4	=	fill in the blank c3bfc103a02ff97_5 %
		$fill in the blank c3bfc103a02ff97_6

Now complete the formulas for (1) the break-even point in sales dollars and (2) the units sold at the break-even point. To calculate this, divide the break-even point in sales dollars by the unit selling price.

Break-Even Point in Sales Dollars	=	$fill in the blank c3bfc103a02ff97_7	=	$fill in the blank c3bfc103a02ff97_8
		fill in the blank c3bfc103a02ff97_9 %

Units Sold at Break-Even Point

=

fill in the blank c3bfc103a02ff97_10 units

Assume that the number of units that Starr sold exceeded the break-even point by one (1).

How much would operating income be? $fill in the blank c3bfc103a02ff97_11

What would operating income be if the units sold exceeded the break-even point by five (5) units? $fill in the blank c3bfc103a02ff97_12