Problem 11-28 Determining the break-even point and preparing a contribution margin income statement LO 11-5 Ritchie...

Answer a
Equation to calculate the break even sales units is as under,
x = FC / (p - v)
x = break even sales units = ?
FC = Fixed cost = $468000 + $271200 = $7,39,200
p = Selling price per unit = $140
v = variable cost per unit = $73 + $11 = $84
x = $739200 / ($140 - $84)
x = 13,200 units
Break even point in units = 13200 units
Break even point in sales dollars = 13200 units * $140 = $18,48,000
Answer b
Equation to calculate the break even sales units using contribution margin approach is as under
x = FC / Unit CM
x = break even sales units = ?
FC = Fixed cost = $468000 + $271200 = $7,39,200
Unit CM = Selling price per unit - Variable cost per unit = $140 - $84 = $56
x = $7,39,200 / $56
x = 13200 units
Break even point in units = 13200 units
Break even point in sales dollars = 13200 units * $140 = $18,48,000
Answer c
Contribution Margin Income statement for break even sales volume
RITCHIE MANUFACTURING COMPANY
Contribution Margin Income Statement
Sales [13200 units * $140]	$1,848,000.00
Less : Variable costs [13200 units * $84]	$1,108,800.00
Contribution Margin	$739,200.00
Fixed Cost	$739,200.00
Net Income	$0.00