The Peace Company has the following functional (traditional) income statement for the prior month.
|
Sales
|
($50 * 100,000 units)
|
|
$5,000,000
|
|
Cost of goods sold
|
|
|
| |
Direct materials
|
$1,200,000
|
|
| |
Direct labor
|
$950,000
|
|
| |
Variable factory overhead
|
$600,000
|
|
| |
Fixed factory overhead
|
$850,000
|
$3,600,000
|
|
Gross profit
|
|
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$1,400,000
|
|
Selling and administrative expense
|
|
|
|
| |
Variable
|
$250,000
|
|
| |
Fixed
|
$120,000
|
$370,000
|
|
Operating income
|
|
|
$1,030,000
|
|
There were no beginning and ending inventories.
|
|
|
Required:
- Calculate the contribution margin per unit.
- Calculate the contribution margin ratio.
- What is the break-even point in units?
- What is the amount of sales in dollars needed to obtain a before-tax profit of $40,000?