Keystone Global Mfg. is a mid-sized industrial manufacturer specializing in precision-engineered hydraulic control valves sold to heavy equipment OEMs across North America. Management wants to analyze the product's profitability at current production levels and determine the break-even point to guide capacity planning decisions for the upcoming fiscal year.
Correct Answers
net Income
$8,085,700.00
break Even Sales
$1,660,031.35
break Even Units
1,953
contribution Margin Per Unit
319
Step-by-Step Solution
MIXED PROBLEM — Contribution Margin + Break-Even CONTRIBUTION MARGIN INCOME STATEMENT: Sales (27,300 units × $850.00) $23,205,000.00 Less: Variable Costs (27,300 × $531.00) $14,496,300.00 ───────────────────────────────────────────────────────── Contribution Margin $8,708,700.00 Less: Fixed Costs $623,000.00 ───────────────────────────────────────────────────────── Net Income $8,085,700.00 Per Unit: CM per Unit = $850.00 − $531.00 = $319.00 CM Ratio = $319.00 ÷ $850.00 = 37.53% BREAK-EVEN ANALYSIS: Break-Even Units = Fixed Costs ÷ CM per Unit Break-Even Units = $623,000.00 ÷ $319.00 = 1952.9781 → 1953 units (rounded up) Break-Even Sales = Fixed Costs ÷ CM Ratio Break-Even Sales = $623,000.00 ÷ 37.5294% = $1,660,031.35