The Peace Company has the following functional income statement for the prior month.
|
Sales ($50 * 100,000 units) |
||
|
Cost of goods sold |
$5,000,000 |
|
|
Direct materials |
$1,200,000 |
|
|
Direct labor |
$950,000 |
|
|
Variable factory |
$600,000 |
|
|
Fixed factory |
$850,000 |
$3,600,000 |
|
Gross profit |
$1,400,00 |
|
|
Selling and administrative expense |
||
|
Variable |
||
|
Fixed |
Operating income
There were no beginning and ending inventories.
Required:
a. Calculate the contribution margin per unit.
b. Calculate the contribution margin ratio.
c. What is the break-even point in units?
d. What is the amount of sales in dollars needed to obtain a before-tax profit of $40,000?