Basic Cost-Volume-Profit Concepts

Klamath Company produces a single product. The projected income statement for the coming year is as follows:

Sales (58,900 units @ $42.00)

$2,473,800

Total variable cost

1,113,210

Contribution margin

$ 1,360,590

Total fixed cost

1,469,160

Operating income

$ (108,570)

Required:

1.Compute the unit contribution margin and the units that must be sold to break even.

Unit contribution margin

$

Break-even units

units

2.Suppose 10,000 units are sold above breakeven. What is the operating income?

$

3.Compute the contribution margin ratio. Use the contribution margin ratio to compute the break-even point in sales revenue.

Contribution margin ratio

%

Break-even sales revenue

$

Suppose that revenues are $200,000 more than expected for the coming year. What would the total operating income be?

$