Thornfield Defense Corp. is a mid-sized defense contractor based in Huntsville, Alabama, specializing in the manufacture of tactical body armor systems for military and law enforcement clients. Management is conducting a profitability review for the current fiscal year and needs to determine the contribution margin, net income, and break-even point to inform upcoming contract bidding decisions.
Correct Answers
net Income
$3,402,200.00
break Even Sales
$2,150,731.18
break Even Units
5,909
contribution Margin Per Unit
186
Step-by-Step Solution
MIXED PROBLEM — Contribution Margin + Break-Even CONTRIBUTION MARGIN INCOME STATEMENT: Sales (24,200 units × $364.00) $8,808,800.00 Less: Variable Costs (24,200 × $178.00) $4,307,600.00 ───────────────────────────────────────────────────────── Contribution Margin $4,501,200.00 Less: Fixed Costs $1,099,000.00 ───────────────────────────────────────────────────────── Net Income $3,402,200.00 Per Unit: CM per Unit = $364.00 − $178.00 = $186.00 CM Ratio = $186.00 ÷ $364.00 = 51.10% BREAK-EVEN ANALYSIS: Break-Even Units = Fixed Costs ÷ CM per Unit Break-Even Units = $1,099,000.00 ÷ $186.00 = 5908.6022 → 5909 units (rounded up) Break-Even Sales = Fixed Costs ÷ CM Ratio Break-Even Sales = $1,099,000.00 ÷ 51.0989% = $2,150,731.18