Silverwood Precision Ltd. is a Canadian manufacturer specializing in high-tolerance optical lens assemblies used in industrial inspection equipment. Management wants to analyze the company's profitability at current production levels and determine the break-even point to better plan for market fluctuations.
Correct Answers
net Income
$9,478,400.00
break Even Sales
$2,826,250.00
break Even Units
2,917
contribution Margin Per Unit
384
Step-by-Step Solution
MIXED PROBLEM — Contribution Margin + Break-Even CONTRIBUTION MARGIN INCOME STATEMENT: Sales (27,600 units × $969.00) $26,744,400.00 Less: Variable Costs (27,600 × $585.00) $16,146,000.00 ───────────────────────────────────────────────────────── Contribution Margin $10,598,400.00 Less: Fixed Costs $1,120,000.00 ───────────────────────────────────────────────────────── Net Income $9,478,400.00 Per Unit: CM per Unit = $969.00 − $585.00 = $384.00 CM Ratio = $384.00 ÷ $969.00 = 39.63% BREAK-EVEN ANALYSIS: Break-Even Units = Fixed Costs ÷ CM per Unit Break-Even Units = $1,120,000.00 ÷ $384.00 = 2916.6667 → 2917 units (rounded up) Break-Even Sales = Fixed Costs ÷ CM Ratio Break-Even Sales = $1,120,000.00 ÷ 39.6285% = $2,826,250.00