Bluestone Systems Corp. is a mid-sized manufacturer of industrial-grade network switching units, serving enterprise clients across the healthcare and logistics sectors. Management wants to analyze the company's profitability at current production levels and determine the break-even point to better understand operational risk. With fixed costs of $1,006,000 and actual sales of 34,800 units at $1,080 each, the finance team must calculate contribution margin, net income, CM ratio, break-even units, and break-even sales dollars.
Correct Answers
net Income
$20,744,000.00
break Even Sales
$1,738,368.00
break Even Units
1,610
contribution Margin Per Unit
625
Step-by-Step Solution
MIXED PROBLEM — Contribution Margin + Break-Even CONTRIBUTION MARGIN INCOME STATEMENT: Sales (34,800 units × $1,080.00) $37,584,000.00 Less: Variable Costs (34,800 × $455.00) $15,834,000.00 ───────────────────────────────────────────────────────── Contribution Margin $21,750,000.00 Less: Fixed Costs $1,006,000.00 ───────────────────────────────────────────────────────── Net Income $20,744,000.00 Per Unit: CM per Unit = $1,080.00 − $455.00 = $625.00 CM Ratio = $625.00 ÷ $1,080.00 = 57.87% BREAK-EVEN ANALYSIS: Break-Even Units = Fixed Costs ÷ CM per Unit Break-Even Units = $1,006,000.00 ÷ $625.00 = 1609.6000 → 1610 units (rounded up) Break-Even Sales = Fixed Costs ÷ CM Ratio Break-Even Sales = $1,006,000.00 ÷ 57.8704% = $1,738,368.00