Problem 11-28

a.N = Number of units to break-even point

SalesVariable costFixed cost=Desired Profit

(Sales price x N) (Variable cost per unit x N) = Fixed cost + Desired Profit

(Contribution margin per unit x N) = Fixed cost + Desired Profit

N = (Fixed cost + Desired Profit) Contribution margin per unit

N = ($+ $) [$- ($+ $)] =Units

Break-even point dollars = Units x $selling price per unit = $

b.N = Number of units to break-even point

N = (Fixed cost + Desired Profit) Contribution margin per unit

N = ($+$) [$- ($+ $)]

N =Units

Break-even point dollars = Units x $selling price per unit = $

Contribution Margin Income Statement

Sales ($x Units)

$

Variable costs ($x )

Contribution margin

$

Fixed costs

Net Income

$

Exercise 11-28 Determining the break-even point and preparing a contribution margin income statement Ritchie Manufacturing Company makes a product that it sells for $150 per unit. The company incurs variabie manufacturing costs of $60 per unit. Variable selling expenses are $18 per unit, annual fixed manufacturing costs are $430,000, and xed selling and administrative costs are $240,000 per year. CHECK FIGURE a. 10,000 units Required Determine the break-even point in units and dollars using each of the following approaches: it. Use the equation method. b. Use the contribution margin per unit approach. c. Conrm your results by preparing a contribution margin income statement for the brea k-even sales volume