chapter 5 E5-12 solution

chapter 5 E5-12 solution - (a) Unit contribution margin =...

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Solutions Guide: Please reword the answers to essay type parts so as to guarantee that your answer is an original. Do not submit as your own. In 2011, Hoffmann Company had a break-even point of $350,000 based on a selling price of $7 per unit and fixed costs of $105,000. In 2012, the selling price and the variable cost per unit did not change, but the break-even point increased to $420,000 Compute the variable cost per unit and the contribution margin ratio for 2011. (Round variable cost to 2 decimal places, e.g. 2.25, and the other answer to 0 decimal places, e.g. 125.)
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Unformatted text preview: (a) Unit contribution margin = Fixed costs Break-even sales in units = $105,000 ($350,000 $7) = $2.10 Variable cost per unit = Unit selling price Unit contribution margin = $7.00 $2.10 = $4.90 Contribution margin ratio = $2.10 $7.00 = 30% (b) Fixed costs Contribution margin ratio = Break-even sales in dollars Fixed costs .30 = $420,000 = $126,000 ($420,000 X.30) Since fixed costs were $105,000 in 2011, the increase in 2012 is $21,000 ($126,000 $105,000)....
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This note was uploaded on 02/15/2012 for the course ACCT 2402 taught by Professor Lewis during the Spring '10 term at Lone Star College System.

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