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Blanchard Company manufactures a single product that sells for $ 180 per unit and whose total variable costs are $ 126 per unit . The company's annual fixed costs are $ 842,400 . ( 1 ) Prepare a contribution margin Income statement for Blanchard Company showing sales , variable costs , and fixed costs at the break even point . ( 2 ) Assume the company's fixed costs increase by $ 141.000 . What amount of sales ( dollars ) is needed to break even

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Answer:

Part 1

Income Statement at 15,600 units

Sales ($ 180 x 15,600)                                     $2,808,000

Less Variable Costs ($126 x 15,600)             ($1,965,600)

Contribution                                                        $842,400

Less Fixed Costs                                               ($842,400)

Net Income                                                                    $0

Part 2

$3,278,000

Explanation:

Break even (units) = Fixed Cost ÷ Contribution per unit

                               = $ 842,400 ÷ ($ 180 - $126)

                               = 15,600 units

Assume the company's fixed costs increase by $ 141.000

Break even (units) = Fixed Cost ÷ Contribution per unit

                               = ($ 842,400 + $ 141.000) ÷ ($ 180 - $126)

                               = 18,212 units

Break even Revenue = 18,212 x  $ 180 =  $3,278,000

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