Hudson Company's break-even point in units and sales dollars = 7,000 units and $2,100,000, respectively.
Data and Calculations:
HUDSON COMPANY
Contribution Margin Income Statement
For Year Ended December 31 Total Per Unit
Sales (10,000 units at $300 each) = $ 3,000,000 $300 (as given)
Variable costs (10,000 units at $240 each) 2,400,000 $240 ($2.4 m /10,000)
Contribution margin 600,000 $60 ($300 - $240)
Fixed costs 420,000
Income $ 180,000
Contribution margin ratio = 20% ($60/$300 x 100)
1. Break-even point in units = Fixed costs/Contribution margin per unit
= $420,000/$60
= 7,000 units
2. Break-even point in sales dollars = Fixed costs/Contribution margin ratio
= $420,000/20%
= $2,100,000
Thus, the break-even point in units and sales dollars = 7,000 units and $2,100,000, respectively.
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