Question

[The following information applies to the questions displayed below.] Hudson Co. reports the contribution margin income statement for 2017. HUDSON CO. Contribution Margin Income Statement For Year Ended December 31, 2017 Sales (10,300 units at $375 each) $ 3,862,500 Variable costs (10,300 units at $300 each) 3,090,000 Contribution margin $ 772,500 Fixed costs 600,000 Pretax income $ 172,500 1. Compute Hudson Co.'s break-even point in units and. 2. Compute Hudson Co.'s break-even point in sales dollars.

Answer 1

1.

Break even in units = 8000 units

2.

Break even in sales dollar = $3000000

Step-by-step explanation:

Break even point in units is the number of units that must be sold in order for the total revenue to be equal to the total cost and reach a point where the business is able to cover all its cost and reach a point where no profit or no loss is earned.

The break even in units is calculated as follows,

Break even in units = Fixed Costs / Contribution margin per unit

Where,

Contribution margin per unit = Selling price per unit - Variable cost per unit

1.

Break even in units = 600000 / (375 - 300)

Break even in units = 8000 units

2.

To calculate the break even point in sales dollar, we simply multiply the break even in units by the selling price per unit. This is the amount of total revenue that must be earned in order to break even.

Break even in sales dollar = 8000 * 375 = $3000000