Pinnacle Defense Group is a mid-sized defense contractor specializing in advanced tactical communication systems for military and government clients. Management is conducting a profitability review for their flagship product and wants to determine the contribution margin, net income at current production levels, and the break-even point in both units and sales dollars.
Correct Answers
net Income
$6,793,000.00
break Even Sales
$1,927,323.01
break Even Units
2,943
contribution Margin Per Unit
226
Step-by-Step Solution
MIXED PROBLEM — Contribution Margin + Break-Even CONTRIBUTION MARGIN INCOME STATEMENT: Sales (33,000 units × $655.00) $21,615,000.00 Less: Variable Costs (33,000 × $429.00) $14,157,000.00 ───────────────────────────────────────────────────────── Contribution Margin $7,458,000.00 Less: Fixed Costs $665,000.00 ───────────────────────────────────────────────────────── Net Income $6,793,000.00 Per Unit: CM per Unit = $655.00 − $429.00 = $226.00 CM Ratio = $226.00 ÷ $655.00 = 34.50% BREAK-EVEN ANALYSIS: Break-Even Units = Fixed Costs ÷ CM per Unit Break-Even Units = $665,000.00 ÷ $226.00 = 2942.4779 → 2943 units (rounded up) Break-Even Sales = Fixed Costs ÷ CM Ratio Break-Even Sales = $665,000.00 ÷ 34.5038% = $1,927,323.01