Ridgeback Aerospace Corp. manufactures precision guidance housings used in commercial satellite deployment systems and sells each unit to defense contractors at a fixed contract price. 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
$1,010,000.00
break Even Sales
$1,734,907.32
break Even Units
4,274
contribution Margin Per Unit
205
Step-by-Step Solution
MIXED PROBLEM — Contribution Margin + Break-Even CONTRIBUTION MARGIN INCOME STATEMENT: Sales (9,200 units × $406.00) $3,735,200.00 Less: Variable Costs (9,200 × $201.00) $1,849,200.00 ───────────────────────────────────────────────────────── Contribution Margin $1,886,000.00 Less: Fixed Costs $876,000.00 ───────────────────────────────────────────────────────── Net Income $1,010,000.00 Per Unit: CM per Unit = $406.00 − $201.00 = $205.00 CM Ratio = $205.00 ÷ $406.00 = 50.49% BREAK-EVEN ANALYSIS: Break-Even Units = Fixed Costs ÷ CM per Unit Break-Even Units = $876,000.00 ÷ $205.00 = 4273.1707 → 4274 units (rounded up) Break-Even Sales = Fixed Costs ÷ CM Ratio Break-Even Sales = $876,000.00 ÷ 50.4926% = $1,734,907.32