Break-Even Point and Target Income:
Detienne Company manufactures and sells one product for $20 per unit. The unit contribution margin is 40% of the sales price, and fixed costs total $80,000.
1. Using the equation approach, compute:
A) The break-even point in sales dollars and units.
B) The sales volume (in units) needed to generate a profit of $40,000.
C) The break-even point (in units) if variable costs increase to 80% of the sales price and fixed costs increase to $100,000.
2. See if you can recompute the solutions to 1(a), 1(b), and 1(c) in one equation step using
either the contribution margin ratio or the contribution margin dollars per unit.
Given:
Price/unit $20.00
Contribution Margin 40%
Margin/unit $8.00
Variable Cost $12.00
Price/unit $20.00
Variable cost/unit $12.00
Contribution $/unit $8.00
Fixed Cost $80,000.00