Blessed Co. produces 1 product and sells it at a price of $70 each. To produce this product, it would cost $10 per unit on materials, $13 on labor, and $12 on variable factory overhead. In addition, sales commissions are 10% of the selling price. The companyâ€™s fixed costs include $340,000 of fixed overhead, and $220,000 on fixed operating expenses.
1) Calculate the following (2 points each).
a. The contribution margin per unit
b. The contribution margin ratio (percentage)
c. The number of units needed to be sold in order to break even.
d. The number of units needed to be sold in order to generate a net income of $420,000.
e. The dollars generated from sales needed in order to break even, using the CM% approach.
f. The dollars generated from sales needed in order to generate a net income of $420,000, using the CM% approach.
g. Margin of safety
h. Margin of safety percentage
2) Prepare an income statement, assuming the number of units produced were the number of units sold in (d) minus 1,000 from last yearâ€™s inventory:
a. Under the absorption costing method, using the gross profit format
b. Under a variable (direct) costing method, using the contribution margin format