Pinnacle Defense Group is a defense contractor specializing in the production of tactical body armor systems for military and law enforcement agencies across North America. With a growing order backlog and rising overhead commitments, management wants to analyze current profitability at planned production levels and determine the break-even point to ensure sustainable operations.
Correct Answers
net Income
$4,779,500.00
break Even Sales
$2,379,104.87
break Even Units
3,600
contribution Margin Per Unit
267
Step-by-Step Solution
MIXED PROBLEM — Contribution Margin + Break-Even CONTRIBUTION MARGIN INCOME STATEMENT: Sales (21,500 units × $661.00) $14,211,500.00 Less: Variable Costs (21,500 × $394.00) $8,471,000.00 ───────────────────────────────────────────────────────── Contribution Margin $5,740,500.00 Less: Fixed Costs $961,000.00 ───────────────────────────────────────────────────────── Net Income $4,779,500.00 Per Unit: CM per Unit = $661.00 − $394.00 = $267.00 CM Ratio = $267.00 ÷ $661.00 = 40.39% BREAK-EVEN ANALYSIS: Break-Even Units = Fixed Costs ÷ CM per Unit Break-Even Units = $961,000.00 ÷ $267.00 = 3599.2509 → 3600 units (rounded up) Break-Even Sales = Fixed Costs ÷ CM Ratio Break-Even Sales = $961,000.00 ÷ 40.3933% = $2,379,104.87