Horizon Global Precision manufactures high-tolerance industrial servo actuators used in aerospace and robotics applications, selling each unit for $564 with variable costs of $330 per unit and total fixed costs of $605,000 per period. Management wants to evaluate the company's profitability at its current production level of 23,900 units and determine the break-even point in both units and sales dollars.
Correct Answers
net Income
$4,987,600.00
break Even Sales
$1,458,205.13
break Even Units
2,586
contribution Margin Per Unit
234
Step-by-Step Solution
MIXED PROBLEM — Contribution Margin + Break-Even CONTRIBUTION MARGIN INCOME STATEMENT: Sales (23,900 units × $564.00) $13,479,600.00 Less: Variable Costs (23,900 × $330.00) $7,887,000.00 ───────────────────────────────────────────────────────── Contribution Margin $5,592,600.00 Less: Fixed Costs $605,000.00 ───────────────────────────────────────────────────────── Net Income $4,987,600.00 Per Unit: CM per Unit = $564.00 − $330.00 = $234.00 CM Ratio = $234.00 ÷ $564.00 = 41.49% BREAK-EVEN ANALYSIS: Break-Even Units = Fixed Costs ÷ CM per Unit Break-Even Units = $605,000.00 ÷ $234.00 = 2585.4701 → 2586 units (rounded up) Break-Even Sales = Fixed Costs ÷ CM Ratio Break-Even Sales = $605,000.00 ÷ 41.4894% = $1,458,205.13