Question

Hudson Co. reports the contribution margin income statement for 2019. HUDSON CO. Contribution Margin Income Statement For Year Ended December 31, 2019 Sales (9,600 units at $225 each) $ 2,160,000 Variable costs (9,600 units at $180 each) 1,728,000 Contribution margin 432,000 Fixed costs 324,000 Pretax income $ 108,000 Exercise 05-16 Break-even LO P2 1. Compute Hudson Co.'s break-even point in units. 2. Compute Hudson Co.'s break-even point in sales dollars.

Answer 1

Answer:

Instructions are listed below.

Explanation:

Giving the following information:

Selling price= 225

Unitary variable cost= 180

Fixed costs= 432,000

The break-even point method is useful to determine the level of unit and sales in dollars required to cover for the fixed costs.

To calculate the break-even point in units, we need to use the following formula:

Break-even point= fixed costs/ contribution margin

Break-even point= 432,000/ (225 - 180)= 9,600 unts

To calculate the break-even point in dollars, we need to use the following formula:

Break-even point (dollars)= fixed costs/ contribution margin ratio

Break-even point (dollars)= 432,000/ (45/225)= $2,160,000

Now, we can prove it:

Sales= 9,600*225= 2,160,000

Total variable cost= (9,600*180)= (1,728,000)

Contribution margin= 432,000

Fixed costs= (432,000)

Net operating profit= 0