Question

Henna Co. produces and sells two products, T and O. It manufactures these products in separate factories and markets them through different channels. They have no shared costs. This year, the company sold 56,000 units of each product. Sales and costs for each product follow.

Product T Product O
Sales $929,600 $929,600
Variable costs 650,720 185,920
Contribution margin 278,880 743,680
Fixed costs 132,880 597,680
Income before taxes 146,000 146,000
Income taxes (32% rate) 51,100 51,100
Net income $94,900 $94,900

Required:
Compute the break-even point in dollar sales for each product.

Answer 1

Henna Co.

Break-even point in dollar sales:

= Total costs = Sales revenue

Product T Product O

Break-even point (sales dollars) = $783,600 $783,600

Step-by-step explanation:

a) Data and Calculations:

Product T Product O

Sales $929,600 $929,600

Variable costs 650,720 185,920

Contribution margin 278,880 743,680

Fixed costs 132,880 597,680

Income before taxes 146,000 146,000

Income taxes (32% rate) 51,100 51,100

Net income $94,900 $94,900

Break-even point in dollar sales:

= Total costs = Sales revenue

Product T Product O

Variable costs $650,720 $185,920

Fixed costs 132,880 597,680

Total costs 783,600 783,600

Sales revenue $783,600 $783,600