Basic Cost-Volume-Profit Concepts Klamath Company produces a single product. The projected income statement for the coming year is as follows: Sales (54,600 units @ $34) Total variable cost Contribution margin Total foced cost Operating income Required: $1,856,400 1,064,700 $ 791,700 801,850 $(10,150) 1. Compute the unit contribution margin and the units that must be sold to break even. Unit contribution margin Break-even units 14.5 55,300 units 2. Suppose 10,000 units are sold above breakeven. What is the operating income? 145,000 3. Compute the contribution margin ratio. Use the contribution margin ratio to compute the break-even point in sales revenue. (Note: Round the contribution margin rate to four decimal places before converting to a percentage (for example, 0.00378 would be rounded to 8038, and entered as 80.38%), and round the sales revenue to the nearest dolas) Contribution margin ratio Break even sales revenue Check My Work 19.5 X % 145,000 X Previous Next 1. Compute the unit contribution margin and the units that must be sold to break even. Unit contribution margin Break-even units 14.5 55,300 units 2. Suppose 10,000 units are sold above breakeven. What is the operating income? 145,000 3. Compute the contribution margin ratio. Use the contribution margin ratio to compute the break-even point in sales revenue. (Note: Round the contribution margin ratio to four decimal places before converting to a percentage (for example, 0.80378 would be rounded to 8038, and entered as 80.38%), and round the sales revenue to the nearest dollar) Contribution margin ratio Break even sales revenue 19.5 X% 145,000 X Suppose that revenues are $200,000 more than expected for the coming year. What would the total operating income be? Feedback Check My Work 1. Divide contribution margin by units. Divide foxed costs by contribution margin. 2. Multiply additional units by contribution margin. Consider the effect, if any, of change in units sold on fixed costs. 3. Multiply additional revenue by contribution margin ratio. Consider the effect of increased revenue with respect to vanable and fixed costs. Check My Work Previous NE