The income statement for Bradford Machine Company for 2011 appears below.
- Income Statement
- For the Year Ended December 31, 2011
- Sales (40,000 units) $1,000,000
- Variable expenses 700,000
- Contribution margin 300,000
- Fixed expenses 345,000
- Net income (loss) $ (45,000)
Instructions
Answer the following independent questions and show computations using the contribution margin technique to support your answers:
1. What was the company's break-even point in sales dollars in 2011?
2. How many additional units would the company have had to sell in 2012 in order to earn net income of $45,000?
3. If the company is able to reduce variable costs by $2.50 per unit in 2012 and other costs and unit revenues remain unchanged, how many units will the company have to sell in order to earn a net income of $45,000?