The Peace Company has the following functional 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
$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:
a. Calculate the contribution margin per unit.
b. 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?