Question

Hudson Co. reports the contribution margin income statement for 2019. HUDSON CO. Contribution Margin Income Statement For Year Ended December 31, 2019 Sales (11,300 units at $175 each) $ 1,977,500 Variable costs (11,300 units at $140 each) 1,582,000 Contribution margin 395,500 Fixed costs 315,000 Pretax income $ 80,500 1. Compute Hudson Co.'s break-even point in units. 2. Compute Hudson Co.'s break-even point in sales dollars.

Answer 1

Answer:

Part 1

9,000 units

Part 2

$1,575,000

Explanation:

Break even point is the level of activity where a company makes neither a profit nor a loss.

Break-even point in units = Fixed Cost ÷ Contribution per unit

                                          = $315,000 ÷ ($175 - $140)

                                          = 9,000 units

Break-even point in sales dollars = Fixed Costs  ÷ Contribution margin

                                                        = $315,000 ÷ ($35/$175)

                                                        = $1,575,000