Acct344 Cost Accounting: Week 4 Problem 1 – The Peace Company has the following functional

Acct34 Cost Accounting
Week 4 Homework

Problem 1:
The Peace Company has the following functional income statement for the prior month
Sales ($50 * 100,000 units) 5,000,000
Cost of goods sold
Direct materials 1,200,000
Direct labor 950,000
Variable factory overhead 600,000
Fixed factory overhead 850,000 3,600,000
Gross profit 1,400,000
Selling and administrative expense
Variable 250,000
Fixed 120,000 370,000
Operating income 1,030,000
There were no beginning and ending inventories.

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?
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