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)	$1,856,400
Total variable cost	1,064,700
Contribution margin	$ 791,700
Total fixed cost	801,850
Operating income	$(10,150)

Unless otherwise instructed, round all total dollar figures (e.g., sales, total contribution margin) to the nearest dollar, breakeven or target units to the nearest unit, and unit costs and unit contribution margins to the nearest cent. Round ratios to four significant digits.

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. (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	$

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