Break-Even Point in Units

Chillmax Company plans to sell 3,500 pairs of shoes at $60 each in the coming year. Unit variable cost is $21 (includes direct materials, direct labor, variable factory overhead, and variable selling expense). Total fixed cost equals $78,000 (includes fixed factory overhead and fixed selling and administrative expense).

Required:

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1. Calculate the break-even pairs of shoes.

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At the break-even point, operating income equals $0. The break-even point tells managers how many units must be sold to cover all costs. Once more than the break-even units are sold, the company begins to earn a profit. So to get the break-even units using the operating income statement, we set operating income to zero, and then solve for the number of units.

Break-Even Units	=	Total Fixed Cost
(Price Variable cost per unit)

Review the "How to Calculate the Break-Even Point in Units" example in your text.

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2. Check your answer by preparing a contribution margin income statement based on the break-even units. Enter all amounts as a positive number.

blank	Total	blank	blank
Sales	$fill in the blank 28df3df7602bfe9_1	blank	blank
Total variable cost	fill in the blank 28df3df7602bfe9_2	blank	blank
Total contribution margin	$fill in the blank 28df3df7602bfe9_3	blank	blank
Total fixed cost	fill in the blank 28df3df7602bfe9_4
Operating income	$fill in the blank 28df3df7602bfe9_5	blank	blank