Question
Martin's Company had the following functional income statement for the year ended December 31, 2020: Sales ($20 X 20,000 units) $400,000 Costs of goods sold:
Martin's Company had the following functional income statement for the year ended December 31, 2020:
Sales ($20 X 20,000 units) $400,000 Costs 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. They sold everything they produced.
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 target profit of $40,000?
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