Basic Cost-Volume-Profit Concepts
Klamath Company produces a single product. The projected income statement for the coming year is as follows:
Sales (58,900 units @ $42.00) $2,473,800
Total variable cost 1,113,210
Contribution margin $ 1,360,590
Total fixed cost 1,469,160
Operating income $ (108,570)
Required:
1. Compute the unit contribution margin and the units that must be sold to break even.
2. Suppose 10,000 units are sold above breakeven. What is the operating income?
3. Compute the contribution margin ratio. Use the contribution margin ratio to compute the break-even point in sales revenue.
Suppose that revenues are $200,000 more than expected for the coming year. What would the total operating income be?