Break-even point in dollar sales: It is the value of sales in dollar where a company is neither making profit nor incurring any loss. Contribution Margin Income Statement: A contribution margin income statement separates the variable cost and fixed cost. The variable costs are deducted first from the sales revenue to arrive at contribution margin, from which fixed costs are deducted to determine the net income or loss. To determine : 1. Compute the break-even point in dollar sales for both (a) plan 1 and (b) plan 2. 2. Prepare a forecasted contribution margin income statement with two columns showing the expected results of plan 1 and plan 2..

Question

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Answer 1

Question

Chapter 21, Problem 6APSA

To determine

Break-even point in dollar sales:

It is the value of sales in dollar where a company is neither making profit nor incurring any loss.

Contribution Margin Income Statement:

A contribution margin income statement separates the variable cost and fixed cost. The variable costs are deducted first from the sales revenue to arrive at contribution margin, from which fixed costs are deducted to determine the net income or loss.

To determine:

1. Compute the break-even point in dollar sales for both (a) plan 1 and (b) plan 2.

2. Prepare a forecasted contribution margin income statement with two columns showing the expected results of plan 1 and plan 2..

Expert Solution & Answer

Answer to Problem 6APSA

Solution:

1.

Break-Even Point in dollars
Plan 1	Plan 2
$750,000	$700,000

2.

Net Income
Plan 1	Plan 2
$122,500	$199,500

Explanation of Solution

Explanation:

1. Computation of break-even point in dollar sales

$\begin{array}{l} \begin{array}{l} \begin{array}{l} \begin{array}{l} B r e a k - E v e n P o i n t i n d o l l a r s a l e s = \frac{F i x e d C o s t}{C o n t r i b u t i o n m a r g i n r a t i o} \\ * C o n t r i b u t i o n m a r g i n r a t i o = \frac{C o n t r i b u t i o n m a r g i n p e r u n i t}{S e l l i n g p r i c e p e r u n i t} \end{array} \\ \begin{array}{l} C o n t r i b u t i o n m a r g i n = S e l l i n g p r i c e p e r u n i t - V a r i a b l e c o s t p e r u n i t \end{array} \\ P l a n 1 \end{array} \\ B r e a k - E v e n P o i n t i n d o l l a r s a l e s = \frac{$ 525, 000}{0 .70} \\ = $ 750, 000 \\ * C o n t r i b u t i o n m a r g i n r a t i o = \frac{$ 17.50}{$ 25.00} = 70 % \\ C o n t r i b u t i o n m a r g i n = $ 25.00 - $ 7.50 = $ 17.50 \\ P l a n 2 \\ B r e a k - E v e n P o i n t i n d o l l a r s a l e s = \frac{$ 525, 000}{0 .75} \\ = $ 700, 000 \\ * C o n t r i b u t i o n m a r g i n r a t i o = \frac{$ 22.50}{$ 30.00} = 75 % \end{array} \\ \begin{array}{l} C o n t r i b u t i o n m a r g i n = $ 30.00 - $ 7.50 = $ 22.50 \end{array} \end{array}$

Total Variable Cost per Unit
Material	$4.00
Direct labor	$2.00
Variable overhead costs	$1.00
Variable selling and administrative costs	$0.50
Total variable cost per unit	$7.50

2.

BURCHARD COMPANY Contribution Margin Income Statement
	Plan 1	Plan 2
Sales Revenue	$1,000,000	$1,080,000
Less: Variable Cost	$300,000	$270,000
Contribution Margin	$700,000	$810,000
Less: Fixed Cost	$525,000	$525,000
Income before taxes	$175,000	$285,000
Income Taxes	$52,500	$85,500
Net Income	$122,500	$199,500

Conclusion

Conclusion:

Burchard Company’s net income under plan 1 is $122,500 and plan 2 is $199,500.

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Answer 2

Question

Chapter 21, Problem 6APSA

To determine

Break-even point in dollar sales:

It is the value of sales in dollar where a company is neither making profit nor incurring any loss.

Contribution Margin Income Statement:

A contribution margin income statement separates the variable cost and fixed cost. The variable costs are deducted first from the sales revenue to arrive at contribution margin, from which fixed costs are deducted to determine the net income or loss.

To determine:

1. Compute the break-even point in dollar sales for both (a) plan 1 and (b) plan 2.

2. Prepare a forecasted contribution margin income statement with two columns showing the expected results of plan 1 and plan 2..

Expert Solution & Answer

Answer to Problem 6APSA

Solution:

1.

Break-Even Point in dollars
Plan 1	Plan 2
$750,000	$700,000

2.

Net Income
Plan 1	Plan 2
$122,500	$199,500

Explanation of Solution

Explanation:

1. Computation of break-even point in dollar sales

$\begin{array}{l} \begin{array}{l} \begin{array}{l} \begin{array}{l} B r e a k - E v e n P o i n t i n d o l l a r s a l e s = \frac{F i x e d C o s t}{C o n t r i b u t i o n m a r g i n r a t i o} \\ * C o n t r i b u t i o n m a r g i n r a t i o = \frac{C o n t r i b u t i o n m a r g i n p e r u n i t}{S e l l i n g p r i c e p e r u n i t} \end{array} \\ \begin{array}{l} C o n t r i b u t i o n m a r g i n = S e l l i n g p r i c e p e r u n i t - V a r i a b l e c o s t p e r u n i t \end{array} \\ P l a n 1 \end{array} \\ B r e a k - E v e n P o i n t i n d o l l a r s a l e s = \frac{$ 525, 000}{0 .70} \\ = $ 750, 000 \\ * C o n t r i b u t i o n m a r g i n r a t i o = \frac{$ 17.50}{$ 25.00} = 70 % \\ C o n t r i b u t i o n m a r g i n = $ 25.00 - $ 7.50 = $ 17.50 \\ P l a n 2 \\ B r e a k - E v e n P o i n t i n d o l l a r s a l e s = \frac{$ 525, 000}{0 .75} \\ = $ 700, 000 \\ * C o n t r i b u t i o n m a r g i n r a t i o = \frac{$ 22.50}{$ 30.00} = 75 % \end{array} \\ \begin{array}{l} C o n t r i b u t i o n m a r g i n = $ 30.00 - $ 7.50 = $ 22.50 \end{array} \end{array}$

Total Variable Cost per Unit
Material	$4.00
Direct labor	$2.00
Variable overhead costs	$1.00
Variable selling and administrative costs	$0.50
Total variable cost per unit	$7.50

2.

BURCHARD COMPANY Contribution Margin Income Statement
	Plan 1	Plan 2
Sales Revenue	$1,000,000	$1,080,000
Less: Variable Cost	$300,000	$270,000
Contribution Margin	$700,000	$810,000
Less: Fixed Cost	$525,000	$525,000
Income before taxes	$175,000	$285,000
Income Taxes	$52,500	$85,500
Net Income	$122,500	$199,500

Conclusion

Conclusion:

Burchard Company’s net income under plan 1 is $122,500 and plan 2 is $199,500.

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Answer 3

Question

Chapter 21, Problem 6APSA

To determine

Break-even point in dollar sales:

It is the value of sales in dollar where a company is neither making profit nor incurring any loss.

Contribution Margin Income Statement:

A contribution margin income statement separates the variable cost and fixed cost. The variable costs are deducted first from the sales revenue to arrive at contribution margin, from which fixed costs are deducted to determine the net income or loss.

To determine:

1. Compute the break-even point in dollar sales for both (a) plan 1 and (b) plan 2.

2. Prepare a forecasted contribution margin income statement with two columns showing the expected results of plan 1 and plan 2..

Expert Solution & Answer

Answer to Problem 6APSA

Solution:

1.

Break-Even Point in dollars
Plan 1	Plan 2
$750,000	$700,000

2.

Net Income
Plan 1	Plan 2
$122,500	$199,500

Explanation of Solution

Explanation:

1. Computation of break-even point in dollar sales

$\begin{array}{l} \begin{array}{l} \begin{array}{l} \begin{array}{l} B r e a k - E v e n P o i n t i n d o l l a r s a l e s = \frac{F i x e d C o s t}{C o n t r i b u t i o n m a r g i n r a t i o} \\ * C o n t r i b u t i o n m a r g i n r a t i o = \frac{C o n t r i b u t i o n m a r g i n p e r u n i t}{S e l l i n g p r i c e p e r u n i t} \end{array} \\ \begin{array}{l} C o n t r i b u t i o n m a r g i n = S e l l i n g p r i c e p e r u n i t - V a r i a b l e c o s t p e r u n i t \end{array} \\ P l a n 1 \end{array} \\ B r e a k - E v e n P o i n t i n d o l l a r s a l e s = \frac{$ 525, 000}{0 .70} \\ = $ 750, 000 \\ * C o n t r i b u t i o n m a r g i n r a t i o = \frac{$ 17.50}{$ 25.00} = 70 % \\ C o n t r i b u t i o n m a r g i n = $ 25.00 - $ 7.50 = $ 17.50 \\ P l a n 2 \\ B r e a k - E v e n P o i n t i n d o l l a r s a l e s = \frac{$ 525, 000}{0 .75} \\ = $ 700, 000 \\ * C o n t r i b u t i o n m a r g i n r a t i o = \frac{$ 22.50}{$ 30.00} = 75 % \end{array} \\ \begin{array}{l} C o n t r i b u t i o n m a r g i n = $ 30.00 - $ 7.50 = $ 22.50 \end{array} \end{array}$

Total Variable Cost per Unit
Material	$4.00
Direct labor	$2.00
Variable overhead costs	$1.00
Variable selling and administrative costs	$0.50
Total variable cost per unit	$7.50

2.

BURCHARD COMPANY Contribution Margin Income Statement
	Plan 1	Plan 2
Sales Revenue	$1,000,000	$1,080,000
Less: Variable Cost	$300,000	$270,000
Contribution Margin	$700,000	$810,000
Less: Fixed Cost	$525,000	$525,000
Income before taxes	$175,000	$285,000
Income Taxes	$52,500	$85,500
Net Income	$122,500	$199,500

Conclusion

Conclusion:

Burchard Company’s net income under plan 1 is $122,500 and plan 2 is $199,500.

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Answer 4

Question

Chapter 21, Problem 6APSA

To determine

Break-even point in dollar sales:

It is the value of sales in dollar where a company is neither making profit nor incurring any loss.

Contribution Margin Income Statement:

A contribution margin income statement separates the variable cost and fixed cost. The variable costs are deducted first from the sales revenue to arrive at contribution margin, from which fixed costs are deducted to determine the net income or loss.

To determine:

1. Compute the break-even point in dollar sales for both (a) plan 1 and (b) plan 2.

2. Prepare a forecasted contribution margin income statement with two columns showing the expected results of plan 1 and plan 2..

Expert Solution & Answer

Answer to Problem 6APSA

Solution:

1.

Break-Even Point in dollars
Plan 1	Plan 2
$750,000	$700,000

2.

Net Income
Plan 1	Plan 2
$122,500	$199,500

Explanation of Solution

Explanation:

1. Computation of break-even point in dollar sales

$\begin{array}{l} \begin{array}{l} \begin{array}{l} \begin{array}{l} B r e a k - E v e n P o i n t i n d o l l a r s a l e s = \frac{F i x e d C o s t}{C o n t r i b u t i o n m a r g i n r a t i o} \\ * C o n t r i b u t i o n m a r g i n r a t i o = \frac{C o n t r i b u t i o n m a r g i n p e r u n i t}{S e l l i n g p r i c e p e r u n i t} \end{array} \\ \begin{array}{l} C o n t r i b u t i o n m a r g i n = S e l l i n g p r i c e p e r u n i t - V a r i a b l e c o s t p e r u n i t \end{array} \\ P l a n 1 \end{array} \\ B r e a k - E v e n P o i n t i n d o l l a r s a l e s = \frac{$ 525, 000}{0 .70} \\ = $ 750, 000 \\ * C o n t r i b u t i o n m a r g i n r a t i o = \frac{$ 17.50}{$ 25.00} = 70 % \\ C o n t r i b u t i o n m a r g i n = $ 25.00 - $ 7.50 = $ 17.50 \\ P l a n 2 \\ B r e a k - E v e n P o i n t i n d o l l a r s a l e s = \frac{$ 525, 000}{0 .75} \\ = $ 700, 000 \\ * C o n t r i b u t i o n m a r g i n r a t i o = \frac{$ 22.50}{$ 30.00} = 75 % \end{array} \\ \begin{array}{l} C o n t r i b u t i o n m a r g i n = $ 30.00 - $ 7.50 = $ 22.50 \end{array} \end{array}$

Total Variable Cost per Unit
Material	$4.00
Direct labor	$2.00
Variable overhead costs	$1.00
Variable selling and administrative costs	$0.50
Total variable cost per unit	$7.50

2.

BURCHARD COMPANY Contribution Margin Income Statement
	Plan 1	Plan 2
Sales Revenue	$1,000,000	$1,080,000
Less: Variable Cost	$300,000	$270,000
Contribution Margin	$700,000	$810,000
Less: Fixed Cost	$525,000	$525,000
Income before taxes	$175,000	$285,000
Income Taxes	$52,500	$85,500
Net Income	$122,500	$199,500

Conclusion

Conclusion:

Burchard Company’s net income under plan 1 is $122,500 and plan 2 is $199,500.

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Answer 5

Chapter 21, Problem 6APSA

To determine

Break-even point in dollar sales:

It is the value of sales in dollar where a company is neither making profit nor incurring any loss.

Contribution Margin Income Statement:

A contribution margin income statement separates the variable cost and fixed cost. The variable costs are deducted first from the sales revenue to arrive at contribution margin, from which fixed costs are deducted to determine the net income or loss.

To determine:

1. Compute the break-even point in dollar sales for both (a) plan 1 and (b) plan 2.

2. Prepare a forecasted contribution margin income statement with two columns showing the expected results of plan 1 and plan 2..

Expert Solution & Answer

Answer to Problem 6APSA

Solution:

1.

Break-Even Point in dollars
Plan 1	Plan 2
$750,000	$700,000

2.

Net Income
Plan 1	Plan 2
$122,500	$199,500

Explanation of Solution

Explanation:

1. Computation of break-even point in dollar sales

$\begin{array}{l} \begin{array}{l} \begin{array}{l} \begin{array}{l} B r e a k - E v e n P o i n t i n d o l l a r s a l e s = \frac{F i x e d C o s t}{C o n t r i b u t i o n m a r g i n r a t i o} \\ * C o n t r i b u t i o n m a r g i n r a t i o = \frac{C o n t r i b u t i o n m a r g i n p e r u n i t}{S e l l i n g p r i c e p e r u n i t} \end{array} \\ \begin{array}{l} C o n t r i b u t i o n m a r g i n = S e l l i n g p r i c e p e r u n i t - V a r i a b l e c o s t p e r u n i t \end{array} \\ P l a n 1 \end{array} \\ B r e a k - E v e n P o i n t i n d o l l a r s a l e s = \frac{$ 525, 000}{0 .70} \\ = $ 750, 000 \\ * C o n t r i b u t i o n m a r g i n r a t i o = \frac{$ 17.50}{$ 25.00} = 70 % \\ C o n t r i b u t i o n m a r g i n = $ 25.00 - $ 7.50 = $ 17.50 \\ P l a n 2 \\ B r e a k - E v e n P o i n t i n d o l l a r s a l e s = \frac{$ 525, 000}{0 .75} \\ = $ 700, 000 \\ * C o n t r i b u t i o n m a r g i n r a t i o = \frac{$ 22.50}{$ 30.00} = 75 % \end{array} \\ \begin{array}{l} C o n t r i b u t i o n m a r g i n = $ 30.00 - $ 7.50 = $ 22.50 \end{array} \end{array}$

Total Variable Cost per Unit
Material	$4.00
Direct labor	$2.00
Variable overhead costs	$1.00
Variable selling and administrative costs	$0.50
Total variable cost per unit	$7.50

2.

BURCHARD COMPANY Contribution Margin Income Statement
	Plan 1	Plan 2
Sales Revenue	$1,000,000	$1,080,000
Less: Variable Cost	$300,000	$270,000
Contribution Margin	$700,000	$810,000
Less: Fixed Cost	$525,000	$525,000
Income before taxes	$175,000	$285,000
Income Taxes	$52,500	$85,500
Net Income	$122,500	$199,500

Conclusion

Conclusion:

Burchard Company’s net income under plan 1 is $122,500 and plan 2 is $199,500.

Answer 6

Chapter 21, Problem 6APSA

To determine

Break-even point in dollar sales:

It is the value of sales in dollar where a company is neither making profit nor incurring any loss.

Contribution Margin Income Statement:

A contribution margin income statement separates the variable cost and fixed cost. The variable costs are deducted first from the sales revenue to arrive at contribution margin, from which fixed costs are deducted to determine the net income or loss.

To determine:

1. Compute the break-even point in dollar sales for both (a) plan 1 and (b) plan 2.

2. Prepare a forecasted contribution margin income statement with two columns showing the expected results of plan 1 and plan 2..

Expert Solution & Answer

Answer to Problem 6APSA

Solution:

1.

Break-Even Point in dollars
Plan 1	Plan 2
$750,000	$700,000

2.

Net Income
Plan 1	Plan 2
$122,500	$199,500

Explanation of Solution

Explanation:

1. Computation of break-even point in dollar sales

$\begin{array}{l} \begin{array}{l} \begin{array}{l} \begin{array}{l} B r e a k - E v e n P o i n t i n d o l l a r s a l e s = \frac{F i x e d C o s t}{C o n t r i b u t i o n m a r g i n r a t i o} \\ * C o n t r i b u t i o n m a r g i n r a t i o = \frac{C o n t r i b u t i o n m a r g i n p e r u n i t}{S e l l i n g p r i c e p e r u n i t} \end{array} \\ \begin{array}{l} C o n t r i b u t i o n m a r g i n = S e l l i n g p r i c e p e r u n i t - V a r i a b l e c o s t p e r u n i t \end{array} \\ P l a n 1 \end{array} \\ B r e a k - E v e n P o i n t i n d o l l a r s a l e s = \frac{$ 525, 000}{0 .70} \\ = $ 750, 000 \\ * C o n t r i b u t i o n m a r g i n r a t i o = \frac{$ 17.50}{$ 25.00} = 70 % \\ C o n t r i b u t i o n m a r g i n = $ 25.00 - $ 7.50 = $ 17.50 \\ P l a n 2 \\ B r e a k - E v e n P o i n t i n d o l l a r s a l e s = \frac{$ 525, 000}{0 .75} \\ = $ 700, 000 \\ * C o n t r i b u t i o n m a r g i n r a t i o = \frac{$ 22.50}{$ 30.00} = 75 % \end{array} \\ \begin{array}{l} C o n t r i b u t i o n m a r g i n = $ 30.00 - $ 7.50 = $ 22.50 \end{array} \end{array}$

Total Variable Cost per Unit
Material	$4.00
Direct labor	$2.00
Variable overhead costs	$1.00
Variable selling and administrative costs	$0.50
Total variable cost per unit	$7.50

2.

BURCHARD COMPANY Contribution Margin Income Statement
	Plan 1	Plan 2
Sales Revenue	$1,000,000	$1,080,000
Less: Variable Cost	$300,000	$270,000
Contribution Margin	$700,000	$810,000
Less: Fixed Cost	$525,000	$525,000
Income before taxes	$175,000	$285,000
Income Taxes	$52,500	$85,500
Net Income	$122,500	$199,500

Conclusion

Conclusion:

Burchard Company’s net income under plan 1 is $122,500 and plan 2 is $199,500.

Answer 7

Chapter 21, Problem 6APSA

To determine

Break-even point in dollar sales:

It is the value of sales in dollar where a company is neither making profit nor incurring any loss.

Contribution Margin Income Statement:

A contribution margin income statement separates the variable cost and fixed cost. The variable costs are deducted first from the sales revenue to arrive at contribution margin, from which fixed costs are deducted to determine the net income or loss.

To determine:

1. Compute the break-even point in dollar sales for both (a) plan 1 and (b) plan 2.

2. Prepare a forecasted contribution margin income statement with two columns showing the expected results of plan 1 and plan 2..

Answer 8

Expert Solution & Answer

Answer to Problem 6APSA

Solution:

1.

Break-Even Point in dollars
Plan 1	Plan 2
$750,000	$700,000

2.

Net Income
Plan 1	Plan 2
$122,500	$199,500

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Explanation of Solution

Explanation:

1. Computation of break-even point in dollar sales

$\begin{array}{l} \begin{array}{l} \begin{array}{l} \begin{array}{l} B r e a k - E v e n P o i n t i n d o l l a r s a l e s = \frac{F i x e d C o s t}{C o n t r i b u t i o n m a r g i n r a t i o} \\ * C o n t r i b u t i o n m a r g i n r a t i o = \frac{C o n t r i b u t i o n m a r g i n p e r u n i t}{S e l l i n g p r i c e p e r u n i t} \end{array} \\ \begin{array}{l} C o n t r i b u t i o n m a r g i n = S e l l i n g p r i c e p e r u n i t - V a r i a b l e c o s t p e r u n i t \end{array} \\ P l a n 1 \end{array} \\ B r e a k - E v e n P o i n t i n d o l l a r s a l e s = \frac{$ 525, 000}{0 .70} \\ = $ 750, 000 \\ * C o n t r i b u t i o n m a r g i n r a t i o = \frac{$ 17.50}{$ 25.00} = 70 % \\ C o n t r i b u t i o n m a r g i n = $ 25.00 - $ 7.50 = $ 17.50 \\ P l a n 2 \\ B r e a k - E v e n P o i n t i n d o l l a r s a l e s = \frac{$ 525, 000}{0 .75} \\ = $ 700, 000 \\ * C o n t r i b u t i o n m a r g i n r a t i o = \frac{$ 22.50}{$ 30.00} = 75 % \end{array} \\ \begin{array}{l} C o n t r i b u t i o n m a r g i n = $ 30.00 - $ 7.50 = $ 22.50 \end{array} \end{array}$

Total Variable Cost per Unit
Material	$4.00
Direct labor	$2.00
Variable overhead costs	$1.00
Variable selling and administrative costs	$0.50
Total variable cost per unit	$7.50

2.

BURCHARD COMPANY Contribution Margin Income Statement
	Plan 1	Plan 2
Sales Revenue	$1,000,000	$1,080,000
Less: Variable Cost	$300,000	$270,000
Contribution Margin	$700,000	$810,000
Less: Fixed Cost	$525,000	$525,000
Income before taxes	$175,000	$285,000
Income Taxes	$52,500	$85,500
Net Income	$122,500	$199,500

Answer 12

Conclusion

Conclusion:

Burchard Company’s net income under plan 1 is $122,500 and plan 2 is $199,500.

Answer 13

Ch. 21 - Prob. 1DQ Ch. 21 - Prob. 2DQ Ch. 21 - When output volume increases, do fixed costs per...Ch. 21 - Prob. 4DQ Ch. 21 - Prob. 5DQ Ch. 21 - Describe the contribution margin ratio in...Ch. 21 - Prob. 7DQ Ch. 21 - Prob. 8DQ Ch. 21 - Prob. 9DQ Ch. 21 - Prob. 10DQ

Answer to Problem 6APSA

Explanation of Solution

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Chapter 21 Solutions