Blanchard Company manufactures a single product that sells for $190 per unit and whose total variable costs are $152 per unit. The company’s annual fixed costs are $562,400. (1) Prepare a contribution margin income statement for Blanchard Company at the break-even point. (2) Assume the company’s fixed costs increase by $133,000. What amount of sales (in dollars) is needed to break even?

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facundobuzzetti facundobuzzetti · Answer 1 · 2020-03-10T01:46:50+01:00

Answer:

Instructions are listed below.

Explanation:

Giving the following information:

Selling price= $190 per unit

Unitary variable cost= $152

The company’s annual fixed costs are $562,400.

1) First, we need to calculate the break-even point in units using the following formula:

Break-even point= fixed costs/ contribution margin

Break-even point= 562,400/(190 - 152)= 14,800 units

Now, we can structure the income statement:

Sales= (14,800*190)= 2,812,000

Variable costs= 14,800*152= (2,249,600)

Contribution margin= 562,400

Fixed costs= (562,000)

Net operating income= 400

2) Break-even point (dollars)= fixed costs/ contribution margin ratio

New fixed costs= 562,000+133,000= 695,000

Break-even point (dollars)= 695,000/ (38/190)

Break-even point (dollars)= $3,475,000