Snowmobile
ATV
Combined
Snowmobile
ATV
Combined
Raw Materials
21,300
$
29,300
$
50,600
$
21,220
$
30,620
$
51,840
$
Employee wages
12,200
$
22,300
$
34,500
$
12,640
$
23,040
$
35,680
$
Dept. manager salary
6,100
$
7,000
$
13,100
$
6,200
$
6,200
$
12,400
$
Supplies used
5,280
$
2,700
$
7,980
$
4,970
$
2,720
$
7,690
$
Depreciation-Equip.
7,800
$
14,300
$
22,100
$
7,800
$
14,300
$
22,100
$
Utilities
540
$
720
$
1,260
$
510
$
680
$
1,190
$
Rent
7,500
$
8,100
$
15,600
$
7,100
$
8,100
$
15,200
$
Totals
60,720
$
84,420
$
145,140
$
60,440
$
85,660
$
146,100
$
Budgeted
Amount
Actual
Amount
Over
(Under)
Budget
Controllable Costs
Raw materials
21,300
$
21,220
$
(80)
$
Employee wages
12,200
$
12,640
$
440
$
Supplies used
5,280
$
4,970
$
(310)
$
Depreciation-Equipment
7,800
$
7,800
$
-
$
Totals
46,580
$
46,630
$
50
$
Budget
Actual
For the Year
Dept. Manager, Snowmobile Department
Responsibility Accounting Performance Report
Sell
275.00
$
Cost
165.00
$
Sales
-
Variable costs
275.00
$
-
165.00
$
Contribution margin
110.00
$
Choose Numerator:
/
Choose Denominator:
=
Contribution margin per unit
/
Selling price per unit
=
110.00
$
/
275.00
$
=
40%
%
Jeans
Contribution Margin Ratio
Contribution Margin Ratio
(2) Compute the contribution margin ratio
(1) Computer the contribution margin per pair
Product per unit
150
$
Variable cost per unit
120
$
Annual fixed costs
471,000
$
Selling price
150
$
less:
Variable cost
120
$
Contribution margin
30
$
Choose Numerator:
/
Choose Denominator:
=
Contribution margin
/
Selling price
=
30
$
/
150
$
=
20%
%
Choose Numerator:
/
Choose Denominator:
=
Fixed costs
/
Contribution margin
=
471,000
$
/
30
$
=
15,700
units
Choose Numerator:
/
Choose Denominator:
=
Fixed costs
/
Contribution margin ratio
=
471,000
$
/
20%
=
2,355,000
$
Dollars
Break-Even Dollars
Blanchard Company
Contribution Margin Ratio
Contribution Margin Ratio
(a) Compute the company's contribution margin per unit
(b) Compute the company's contribution margin ratio
(c) Compute the company's break-even points in units
Break-Even Units
Break-Even Units
(d) Compute the company's break-even points in dollars of sales
Break-Even Dollars
Sales
15,700
x
150
$
=
2,355,000
$
Variable costs
15,700
x
120
$
=
1,884,000
$
Contribution margin
15,700
x
30
$
=
471,000
$
Fixed costs
471,000
$
Net Income
-
$
Contribution Margin Income Statement
Blanchard Company
Product per unit
160
$
Product per unit
195
$
Variable cost per unit
128
$
Variable cost per unit
128
$
Annual fixed costs
625,000
$
Annual fixed costs
625,000
$
Selling price
160
$
less:
Variable cost
128
$
Contribution margin
32
$
Choose Numerator:
/
Choose Denominator:
=
Contribution margin
/
Selling price
=
32
$
/
160
$
=
Choose Numerator:
/
Choose Denominator:
=
Fixed costs
/
Contribution margin
=
625,000
$
/
32
$
=
Choose Numerator:
/
Choose Denominator:
=
Fixed costs
/
Contribution margin ratio
=
625,000
$
/
20%
=
Sales
19,531
x
160
$
=
Variable costs
19,531
x
128
$
=
Contribution margin
19,531
x
32
$
=
Fixed costs
Net Income
Sales
39,500
x
195
$
=
Variable costs
39,500
x
135
$
=
Contribution margin
39,500
x
60
$
=
Fixed costs
Income before taxes
Income tax expense
Net income
(d) Compute the company's break-even points in dollars of sales
Blanchard Company
(a) Compute the company's contribution margin per unit
(b) Compute the company's contribution margin ratio
Blanchard Company
Current Forecasted
(c) Compute the company's break-even points in units
Blanchard Company
Forecasted Contribution Margin Income Statement
Blanchard Company
Contribution Margin Income Statement
39500
units
income tax rate
20%
20%
%
19,531
units
3,125,000
$
Dollars
3,125,000
$
2,500,000
$
625,000
$
625,000
$
-
$
7,702,500
$
5,332,500
$
2,370,000
$
625,000
$
1,745,000
$
349,000
$
1,396,000
$
Break-Even Units
Break-Even Units
Break-Even Dollars
Contribution Margin Ratio
Contribution Margin Ratio
Break-Even Dollars
Sales
3,400,000
$
Sales
3,500,000
$
Contribution Margin
60%
Contribution Margin
25%
Fixed costs
1,600,000
$
Fixed costs
410,000
$
Company A
Sales
3,400,000
$
100%
Variable costs
1,360,000
$
40%
Contribution margin
2,040,000
$
60%
Fixed costs
1,600,000
$
Pretax income
440,000
$
Choose:
Numerator
/
Denominator
=
Contribution margin
/
Pretax income
=
Company A
2,040,000
$
/
440,000
$
=
Company B
875,000
$
/
465,000
$
=
Company A
Sales
4,080,000
$
100%
Variable costs
1,360,000
$
40%
Contribution margin
2,448,000
$
60%
Fixed costs
1,600,000
$
Pretax income
848,000
$
Company A
Which company benefits more from a 20% increase in sales:
Contribution Margin Income Statement - Forecasted 20%
Company A
Company B
Contribution Margin Income Statement
Degree of Operating Leverage
Company B
3,500,000
$
100%
2,625,000
$
75%
875,000
$
25%
410,000
$
465,000
$
Ratio
Degree of Operating Leverage
4.64
1.88
Company B
4,200,000
$
100%
2,625,000
$
75%
1,050,000
$
25%
410,000
$
640,000
$
