Quarry Hill Systems is a mid-sized manufacturer of industrial-grade seismic monitoring equipment headquartered in Denver, Colorado. The company sells its flagship SteadyWave Pro seismic sensor units to mining and construction firms across North America, and management wants to analyze overall profitability and identify the break-even point to guide production planning for the upcoming fiscal year.
Correct Answers
net Income
$7,166,400.00
break Even Sales
$2,854,035.71
break Even Units
5,608
contribution Margin Per Unit
224
Step-by-Step Solution
MIXED PROBLEM — Contribution Margin + Break-Even CONTRIBUTION MARGIN INCOME STATEMENT: Sales (37,600 units × $509.00) $19,138,400.00 Less: Variable Costs (37,600 × $285.00) $10,716,000.00 ───────────────────────────────────────────────────────── Contribution Margin $8,422,400.00 Less: Fixed Costs $1,256,000.00 ───────────────────────────────────────────────────────── Net Income $7,166,400.00 Per Unit: CM per Unit = $509.00 − $285.00 = $224.00 CM Ratio = $224.00 ÷ $509.00 = 44.01% BREAK-EVEN ANALYSIS: Break-Even Units = Fixed Costs ÷ CM per Unit Break-Even Units = $1,256,000.00 ÷ $224.00 = 5607.1429 → 5608 units (rounded up) Break-Even Sales = Fixed Costs ÷ CM Ratio Break-Even Sales = $1,256,000.00 ÷ 44.0079% = $2,854,035.71