PA6-1 Calculating Contribution Margin, Contribution Margin Ratio, Break-Even Point OLO 6-1, 6-2 Hermosa, Inc., produces one model of mountain bike. Partial information for the company follows: Page 293 Number of bikes produced and sold 400 800 1,000 Total costs Variable costs $125.000 $? $? Faced costs per year 2 ? Total costs Cost per unit Variable cost per unit 2 2 Fixed cost per unit 2 ? ? Total cost per unit ? $543-75 2 Required: 1. Complete the table. 2. Calculate Hermosa's contribution margin ratio and its total contribution margin at each sales level indicated in the table assuming the company sells each bike for $650. 3. Consider the contribution margins just calculated and total fixed costs. Determine whether Hermosa's break-even point will be more or less than 500 units. 4. Calculate Hermosa's break-even point in units and sales revenue. B D E F H HERMOSA, INC. Requirement 1: 400 800 1000 Bikes produced and sold Total costs Variable costs Fixed costs per year Total costs 125,000 $ 185,000 310,000 $ Correct! 250,000 $ 312,500 185,000 185,000 435,000 $ 497,500 Correct! Correct! $ 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 $ Cost per unit Variable cost per unit Fixed cost per unit Total cost per unit 312.50 $ 462.50 775.00 $ 312.50 $ 231.25 543.75 $ 312.50 185.00 497.50 Correct! $ Correct! Requirement 2: 400 800 1000 Bikes produced and sold Total revenue Variable costs Contribution margin Contribution margin ratio 29 30 31 % Try again! Requirement 4: Break-even units Operator / Name of Variable #1 fixed expense Amount of Variable #1 $185,000 Name of Variable #2 cm per unit Amount of Variable #2 338 Result 548 Correct! Name of Variable #1 Operator Break-even sales dollars (approach 1) Name of Variable #2 Amount of Variable #1 Amount of Variable #2 0 Result Break-even sales dollars (approach 2) Name of Variable #1 Operator Name of Variable #2 Amount of Variable #1 Amount of Variable #2 0 Result