Vanguard Aerospace Ltd. is a mid-sized aerospace manufacturer based in Tucson, Arizona, specializing in precision-guided avionics modules sold to defense contractors and commercial aviation firms. With a recent surge in government contracts, management wants to conduct a thorough profitability analysis and determine the break-even point to better understand the company's margin of safety heading into the next fiscal year.
Correct Answers
net Income
$9,400,700.00
break Even Sales
$2,022,394.65
break Even Units
3,860
contribution Margin Per Unit
299
Step-by-Step Solution
MIXED PROBLEM — Contribution Margin + Break-Even CONTRIBUTION MARGIN INCOME STATEMENT: Sales (35,300 units × $524.00) $18,497,200.00 Less: Variable Costs (35,300 × $225.00) $7,942,500.00 ───────────────────────────────────────────────────────── Contribution Margin $10,554,700.00 Less: Fixed Costs $1,154,000.00 ───────────────────────────────────────────────────────── Net Income $9,400,700.00 Per Unit: CM per Unit = $524.00 − $225.00 = $299.00 CM Ratio = $299.00 ÷ $524.00 = 57.06% BREAK-EVEN ANALYSIS: Break-Even Units = Fixed Costs ÷ CM per Unit Break-Even Units = $1,154,000.00 ÷ $299.00 = 3859.5318 → 3860 units (rounded up) Break-Even Sales = Fixed Costs ÷ CM Ratio Break-Even Sales = $1,154,000.00 ÷ 57.0611% = $2,022,394.65