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Blackmon Manufacturing: Break-Even Point

Blackmon Manufacturing Company makes a product that it sells for $50 per unit. The company incurs variable manufacturing costs of $14 per unit. Variable selling expenses are $6 per unit, annual fixed manufacturing costs are $189,000, and fixed selling and administrative costs are $141,000 per year.

Determine the break even point in units and dollars using each of the following approaches.

A. Equation Method
B. Contribution margin per unit
C. Contribution margin ratio
D. Confirm your results by preparing a contribution margin income statement for the break-even sales volume.

Please show the work.

Solution Preview

Determine the break even point in units and dollars using each of the following approaches.

A. Equation Method

Let X be equal to number of break even units sold.

50X - (14 + 6)X - 189,000 - 141,000 = 0
30X - 330,000 = 0
X = 11,000 units
Break even in dollars = 11,000 x $50 = ...

Solution Summary

This solution explains how to determine the break even point in units and dollars using each of the following approaches: Equation Method, Contribution margin per unit and the Contribution margin ratio. This is all completed in just over 160 words.

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