The cost of manufacturing and marketing their toys, at their normal factory volume of 5,000 toys per month, is shown in the table below. These toys sell for $50 each. Joe is making a small profit, but would prefer to increase profitability.

Hint: Fixed costs are shown on a per-unit basis in the table based on normal volume. However, fixed costs as a total do not change when volume changes, so you will need to determine total fixed costs first.

	Per Unit	Per Unit
Unit MFR Costs:
Variable Materials	$10.00
Variable Labor	$9.00
Variable Overhead	$5.00
Fixed Overhead	$6.00
Total Unit MFR Costs:		$30.00
Unit Marketing Costs:
Variable Marketing Costs	$4.00
Fixed Marketing Costs	$8.00
Total Unit Marketing Costs:		$12.00

Questions:

A) Prepare a Contribution Margin Income Statement for the company using the given financial data at their normal factory volume. Include line items for each type of cost as well as subtotals for the variable and fixed costs.

B) What is the break-even point in units? (Show your calculations.)

C) What is the break-even point in sales dollars? (Show your calculations.)

D) Using a Contribution Margin Income Statement, verify that your calculated break-even volume results in Operating Income of Zero. (Prepare the entire Contribution Margin statement at the break-even level.)

Contribution Margin Format Example:

Volume
Sales
Variable Costs
Variable Costs Total
Contribution Margin
Fixed Costs
Fixed Costs Total
Operating Income