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