Pb4.
lo 3.2west island distributes a single product. the company’s sales and expenses for the month of june are shown.

using the information presented, answer these questions:

what is the break-even point in units sold and dollar sales?
what is the total contribution margin at the break-even point?
if west island wants to earn a profit of $21,000, how many units would they have to sell?
prepare a contribution margin income statement that reflects sales necessary to achieve the target profit.

The question is incomplete, the complete question is given below.

                                $

Sales price               150

Variable cost              80

Fixed expenses42,000

Break-even point (in units) =  600 unitsBreak-even point (sales) = $90,000Contribution  margin ratio = 46.6%Units to be sold to achieve a profit of $21,000 :900 unitsContribution margin income  statement (see below)

                    West Island

Contribution margin income statement

Sales ( $150 900)                            135,000

less variable costs($80 × 900)        ( 72,000)

Contribution                                       63,000

Less fixed cost                                  (42,000)

Profit                                                   21,000

Explanation:

Break-even point is the level of activity where a business makes no profit or loss. The number of units to be produced which equates the total cost to total revenue.

It is calculated as ;

Break-even point (in units)=Total general fixed cost/ (selling price per  - Variable cost)

Break-even point (sales) = Break-even point (units)× units price

So for West Island, we do as follows:

Break-even point (in units) = $42,000/$(150-80)= 600 units

Break-even point (sales) =   600 × $150 = $90,000

Contribution margin ratio(C.M.R) is the proportion of sales made as contribution. It is determined as contribution/sales revenue.

To calculate the total contribution at the break-even, we just multiply the contribution per unit by the break-even point (units)

Contribution at the break-even point= (150-80) × 600=$42,000

Contribution  margin ratio = 42,000/(600*150)= 46.6%

Units to be sold to achieve target profit= (Fixed cost + target profit)/ (S.P- V.C)

Therefore to earn a profit of $21,000., West Island will have to sell:

$(42,000 + 21,000)/$(150-80) = 900 units

                                                    West Island

Contribution margin income  statement

Sales ( $150 900)                            135,000

less variable costs($80 × 900)        ( 72,000)

Contribution                                       63,000

Less fixed cost                                  (42,000)

Profit                                                   21,000

This confirms our answer !

                                   

Words that give you hints

Explanation:

These are some examples of the signal words that can help you to understand them more properly: For this reason, however, meanwhile, because...

These signal words can help you to take better notes because they can point to the facts that are important for understanding sentences or some facts. After them, we can always see the explanation of the previous. They point to the main ideas and concrete explanations.

Signal words give you hints about what you can expect next when you are reading something or when you are taking the notes and whenever you read notes or some sentence again you will know when the explanation is, which is after the signal words.