Thorngate Advanced Group is a mid-sized manufacturer of precision industrial laser modules used in automated fabrication systems, operating out of three facilities in the Pacific Northwest. Management wants to analyze overall profitability at current production levels and determine the minimum sales volume required to cover all costs. By understanding both contribution margin and break-even dynamics, leadership aims to make more informed pricing and capacity decisions for the upcoming fiscal year.
Correct Answers
net Income
$5,705,400.00
break Even Sales
$3,323,804.20
break Even Units
3,301
contribution Margin Per Unit
429
Step-by-Step Solution
MIXED PROBLEM — Contribution Margin + Break-Even CONTRIBUTION MARGIN INCOME STATEMENT: Sales (16,600 units × $1,007.00) $16,716,200.00 Less: Variable Costs (16,600 × $578.00) $9,594,800.00 ───────────────────────────────────────────────────────── Contribution Margin $7,121,400.00 Less: Fixed Costs $1,416,000.00 ───────────────────────────────────────────────────────── Net Income $5,705,400.00 Per Unit: CM per Unit = $1,007.00 − $578.00 = $429.00 CM Ratio = $429.00 ÷ $1,007.00 = 42.60% BREAK-EVEN ANALYSIS: Break-Even Units = Fixed Costs ÷ CM per Unit Break-Even Units = $1,416,000.00 ÷ $429.00 = 3300.6993 → 3301 units (rounded up) Break-Even Sales = Fixed Costs ÷ CM Ratio Break-Even Sales = $1,416,000.00 ÷ 42.6018% = $3,323,804.20