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Praveen Company manufactures and markets a number of rope products. Management is considering the future of Product XT, a special rope for hang gliding that
Praveen Company manufactures and markets a number of rope products. Management is considering the future of Product XT, a special rope for hang gliding that has not been as profitable as planned. Because Product XT is manufactured and marketed independently of the other products, its total costs can be precisely measured. Next year's plans call for a $200 selling price per unit. Its fixed costs for the year are expected to be $270,000. Variable costs for the year are expected to be $140 per unit. 2. Prepare a contribution margin income statement for Product XT at the break-even point. PRAVEEN COMPANY Contribution Margin Income Statement (at Break-Even) - Product XT Sales Less Variable cost Contribution margin Less Fixed costs Income Units $ per unit Total 1. Estimate Product XT's break-even point in terms of sales units and sales dollars. (Do not round intermediate calculations.) Contribution Margin per unit $ 200 140 60 Sales Less: Variable cost Contribution margin $ Contribution Margin ratio Numerator: CM per unit Denominator: Sales per unit Contribution margin ratio 0 1(a) Estimate Product XT's break-even point in terms of sales units. (1 unit 100 yards) Numerator: Fixed costs Denominator: Contribution margin per unit 1(b) Estimate Product XT's break-even point in terms of sales dollars. Numerator: Fored costs Denominator: Contribution margin ratio - Break-even units 0 Break-even dollars 0
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