APPLY THE CONCEPTS: Calculate the break-even point in sales dollars for Clapton Products

Further analysis of Clapton Products's 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, $4.00 per unit; direct labor costs, $5.00 per unit; and variable overhead costs, $1.00 per unit. At this time, the selling price of $20 will not change. Complete the following formulas for the revised fixed costs. Enter the ratio as a percentage.

Contribution Margin per Unit=$-$=$

Contribution Margin Ratio=$=%$

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=$=$%

Units Sold at Break-Even Point=units

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

How much would operating income be?

$

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