This preview has intentionally blurred sections. Sign up to view the full version.View Full Document
Unformatted text preview: E. The same as the contribution margin ratio. Problem ( 60 points ) The following information describes a product expected to be produced and sold by Hadley Company: Required: (a) Calculate the contribution margin ratio. (b) Calculate the break-even point in dollar sales. (c) What dollar amount of sales would be necessary to achieve a pretax income of $120,000? (a) Contribution Margin Ratio = Contribution margin per unit / Sales price per unit Contribution margin per unit = Sales price per unit - Total variable cost per unit = $80-$32 = $48 Contribution Margin Ratio = $48 / $80 = $.60 or 48/80 = 60% (b) Break-even point in Dollars = Fixed Costs / Contribution margin ratio = $630,000 / .60 = $1,050,000 (c) Dollar amount of sales necessary to achieve a pretax income of $120,000 = (Fixed cost + desired profit) / Contribution Margin Ratio = ($630,000 + $120,000) / .60 = $1,250,000 Excellent! 3...
View Full Document
This note was uploaded on 11/11/2011 for the course AC 202 taught by Professor Nancyeverett during the Spring '09 term at Park.
- Spring '09