Ajack, using the marginal costing income statement, reports the following for sales of
Variable costs $400,000
Contribution margin $350,000
Fixed costs $210,000
Net income $140,000
(a) Determine the break-even point in units for Ajack.
(b) Assume that Ajack intends to have a profit of 20% more than the current profit. How many units must he sell to achieve his target?
(c) Ajack believes that the company could increase sales by 8,000 units. However, this will increase fixed costs by $22,000. What will be Ajack’s estimated income in this
situation? Does the profit increase or decrease? (2 marks)
(d) What will the company’s new break-even point, assuming that Ajack’s fixed costs
increase by $22,000?
(e) What is contribution margin and how can it be expressed?
Dear Student, Please... View the full answer