Assume that you are part of the accounting team for Gordon Manufacturing. The company currently expects to sell 628 units for total revenue of $21,800 each month. Gordon 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 $9,900 are also expected, which includes fixed overhead and selling and administrative costs. Using this information, complete the contribution margin income statement shown below.

Gordon Manufacturing

Contribution Margin Income Statement

Sales $?

Less: Variable costs $?

Contribution margin $?

Less: Fixed Costs $?

Operating income $?

b. Gordon Manufacturing is examining cost behavior patterns. Your recommendation is to first determine the break-even point in units. First, calculate the contribution margin (CM) per unit (rounded to the nearest dollar). $

Next, complete the formula below to determine the break-even units.

Total Fixed Costs / Contribution Margin per Unit = Units

$? / $ ? = (?)units

c.

Now consider each of the following scenarios for Gordon 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
Gordon will dispose of a machine in the factory. The depreciation on that equipment is $500 per month.	After some extensive market research, Gordon has determined that a sales price increase of $2 per unit will not affect the sales volume and will be effective immediately.	Gordon has been experiencing quality problems with a materials supplier. Changing suppliers will improve the quality of the product but will cause direct materials costs to increase by $1 per unit.
CM per unit: ?$	CM per unit: ?$	CM per unit: ?$
Break-even units: (?)units	Break-even units: (?0units	Break-even units: (?)units