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### Peace and Suzy Company

Price: \$4.99

Problem 1

The Peace Company has the following functional (traditional) income statement for the prior month.
Sales    (\$50 X 100,000 units)              \$5,000,000

Cost of goods sold
Direct materials \$1,200,000
Direct labor      \$950,000
Gross profit                                                       \$1,400,000
Variable           \$250,000
Fixed    \$120,000                                      \$370,000
Operating income                                                   \$1,030,000
There were no beginning and ending inventories.
Required:
a. Calculate the contribution margin per unit.
b. Calculate the contribution margin ratio.
c. What is the break-even point in units?
d. What is the amount of sales in dollars needed to obtain a before-tax profit of \$40,000?

Problem 2
Suzy Manufacturing has estimated monthly sales of 18,000 units for \$48 per unit. Variable costs include manufacturing costs of \$27 and distribution costs of \$9 per unit. Fixed costs are \$60,000 per month.

Required
Determine each of the following values.
1. Unit contribution margin
2. Monthly break-even unit sales volume
3. Before-tax monthly profit
4. Monthly margin of safety in units
5. Create a contribution margin-based income statement.