cornerstones 3rd eddition by Hansen, Don R

#4

The Leonardo Company had the following functional income statement for the month of July 2016:

Sale ($20 x 20,000 units ) $400,000

Cost of goods sold:

Direct materials $60,000

Direct labor 40,000

Variable factory overhead 120,000

Fixed factory overhead 50,000 270,000

Gross profit $130,000

Selling and administrative expenses:

Variable $20,000

Fixed $50,000 $70,000

Operating income $60,000

There were no beginning and ending inventories.

Required:

a. Calculate the contribution margin per unit.

b. Calculate the contribution margin ratio.

c. What is the break-even point in units?

d. What is the amount of sales in dollars needed to obtain a before-tax profit of $40,000?