Exercise 21-9 Contribution margin and break-even LO P2 Blanchard Company manufactures a single product that sells for $205 per unit and whose total variable costs are $164 per unit. The company's annual fixed costs are $553,500 (a) Compute the company's contribution margin per unit. Contribution margin (b) Compute the company's contribution margin ratio. Choose Choose Numerator: Denominator: Contribution Margin Ratio Contribution margin ratio (c) Compute the company's break-even point in units. Choose Numerator: Choose Denominator: - Break-Even Units Break-even units (d) Compute the company's break-even point in dollars of sales Choose Numerator: Choose Denominator: Break-Even Dollars Break even dollars Required information Problem 21-4A Break-even analysis; income targeting and forecasting LO C2, P2, A1 [The following information applies to the questions displayed below) Astro Co. sold 20,500 units of its only product and incurred a $67,750 loss ignoring taxes) for the current year as shown here. During a planning session for year 2018's activities, the production manager notes that variable costs can be reduced 40% by installing a machine that automates several operations. To obtain these savings, the company must increase its annual fixed costs by $155,000. The maximum output capacity of the company is 40,000 units per year ASTRO COMPANY Contribution Margin Income Statement For Year Ended December 31, 2017 Sales $ 779,000 Variable costs 584,250 Contribution margin 194,750 Fixed costs 262.500 Net loss $ (67,750) Required: 1. Compute the break-even point in dollar sales for year 2017. (Round your answers to 2 decimal places.) Contribution Margin Per Unit Current Contribution Margin Ratio Choose Numerator: 1 Choose Denominator: = Contribution Margin Ratio Contribution margin ratio Break-Even Point in Dollar Sales: Choose Numerator: Choose Denominator: Break-Even Point in Dollars Break-even point in dollars Problem 21-4A Part 3 3. Prepare a forecasted contribution margin income statement for 2018 that shows the expected results with the machine installed. Assume that the unit selling price and the number of units sold will not change, and no income taxes will be due. (Do not round intermediate calculations. Round your answers to the nearest whole dollar.) ASTRO COMPANY Forecasted Contribution Margin Income Statement For Year Ended December 31, 2018 Contribution margin Problem 21-4A Part 4 4. Compute the sales level required in both dollars and units to earn $250,000 of target pretax income in 2018 with the machine installed and no change in unit sales price. (Do not round intermediate calculations. Round your answers to 2 decimal places. Round "Contribution margin ratio" to nearest whole percentage) Sales level required in dollars Choose Numerator: Choose Denominator: Sales dollars required Sales dollars required Sales level required in units Choose Numerator: Choose Denominator: - Sales units required Sales units required Exercise 21-12 Computing sales to achieve target income LO C2 Blanchard Company manufactures a single product that sells for $280 per unit and whose total variable costs are $224 per unit. The company's annual fixed costs are $879,200. Management targets an annual pretax income of $1,400,000. Assume that fixed costs remain at $879.200. (1) Compute the unit sales to earn the target income. Choose Numerator: Choose Denominator: - Units to Achieve Target Units to achieve target (2) Compute the dollar sales to earn the target income Choose Numerator: Choose Denominator: Dollars to Achieve Target Dollars to achieve target = Required information Problem 21-5A Break-even analysis, different cost structures, and income calculations LO C2, A1, P4 The following information applies to the questions displayed below.) Henna Co. produces and sells two products, T and O. It manufactures these products in separate factories and markets them through different channels. They have no shared costs. This year, the company sold 46,000 units of each product. Sales and costs for each product follow. Sales Variable costs Contribution margin Fixed costs Income before taxes Income taxes (328 rate) Net income Product T Product O $ 800, 400 $ 800,400 640,320 160,080 160,080 640,320 32,080 512,320 128,000 128,000 44,800 44,800 $ 83,200 $ 83,200 Required: 1. Compute the break-even point in dollar sales for each product. (Enter CM ratio as percentage rounded to 2 decimal places.) Product T Contribution Margin Ratio Choose Numerator: Choose Denominator Contribution Margin Ratio Contribution margin ratio Break-Even Point in Dollars Choose Numerator: 1 Choose Denominator Break-Even Point in Dollars Break-even point in dollars Producto Contribution Margin Ratio Contribution margin ratio Break-even Points in Dollars Break-even point in dollars Problem 21-5A Part 2 2. Assume that the company expects sales of each product to decline to 29,000 units next year with no change in unit selling price. Prepare forecasted financial results for next year following the format of the contribution margin income statement as just shown with columns for each of the two products (assume a 35% tax rate). Also, assume that any loss before taxes yields a 35% tax benefit. (Round "per unit" answers to 2 decimal places. Enter losses and tax benefits, if any, as negative values.) HENNA CO. Forecasted Contribution Margin Income Statement Product T Producto Units Per unit Total $ Per unit Total Total Contribution margin Net income (loss) Problem 21-5A Part 3 3. Assume that the company expects sales of each product to increase to 60,000 units next year with no change in unit selling price. Prepare forecasted financial results for next year following the format of the contribution margin income statement shown with columns for each of the two products (assume a 35% tax rate). (Round "per unit" answers to 2 decimal places.) HENNA CO. Forecasted Contribution Margin Income Statement Product T Producto Units $ Per unit Total $ Per unit Total Total Contribution margin Net income (loss)