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HW ch 18 solutions - Exercise 18-9(30 minutes 1(a...

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Exercise 18-9 (30 minutes) 1. (a) Contribution margin per unit = $360 – $270 = $90 per unit (b) Contribution margin ratio = $90 / $360 = 25% (c) Break-even point in units = $1,125,000 / $90 = 12,500 units (d) Break-even point in dollars = $1,125,000 / 25% = $4,500,000 (Alternatively: 12,500 units x $360 = $4,500,000 ) Exercise 18-10 (20 minutes) 1. SETON COMPANY Contribution Margin Income Statement (at Break-Even) Sales (12,500 x $360) ............................................................... $4,500,000 Variable costs (12,500 x $270) ................................................ 3,375,000 Contribution margin (12,500 x $90) ....................................... 1,125,000 Fixed costs .............................................................................. 1,125,000 Net income .............................................................................. $ 0 2. Sales (in dollars) to break even with increased fixed costs Break-even = (Original fixed costs + Additional fixed costs) Contribution margin ratio = ($1,125,000 + $270,000) / 25%
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= $5,580,000
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Problem 18-1A (25 minutes) Parts 1 and 2 Harris Drum Company Contribution Margin Income Statement For Year Ended December 31, 2009 % (2,000 units) Per unit of sales Sales ($500 x 2,000) ................ $1,000,000 $500 100% Variable costs Plastic for casing ..................
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