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Contribution-Margin Ratio and Breakeven Point

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Boston Bakers Inc, manufactures and sells a line of fat-free cookies under the name Aunt Maggie's Cookies. The process Boston Bakers uses to manufacture of the cookies is labor intensive. It relies on heavily on direct labor.

Last year Boston Bakers sold 300,000 dozen cookies at $2.50 per dozen. Variable costs at this level of production totaled $1.50 per dozen, and fixed costs for the year totaled $150,000.

a. Prepare a contribution-margin income statement for last year.

b. Calculate the company's contribution-margin ratio and breakeven point in sales units for last year.

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This explains the steps to compute the Contribution-Margin Ratio and Breakeven Point.

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in US$
Sales revenue 750000
Less variable expenses:
Variable costs 450000

Contribution ...

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