The budgets of four companies yield the following information (Click the icon to view the budget information for the four companies.) 1. Fill in the blanks for each company 2. Compute break -even, in sales dollars, for each company Which c even, in sales dollars, for each company Which company has the lowest break-even point in sales dollars? What causes the low break-even point? Requirement 1. Fill in the blanks for each company (Round the contribution margin per unit and ratio calculations to two decimal places.) $ 720,000 S 400,000 S 190,000[ Target sales Variable expenses Fixed expenses Operating income (loss) Units sold Contribution margin per unit$ Contribution margin ratio Data Table 216,0001 ?? ? ] 270,000 90,000 $ 154,000 Company $140,000 15,750 s 950 s 4000 125,000 Target sales Variable expenses Fixed expenses s 720,000 400,000 s 190,000 6.00 0.65 216,000 270.000 156,000 90,000 Requirement 2. Compute break-even, in sales dollars, for each company Which company has the lowest break-even point in sales dollars? What causes the low break-even point? S $ 140.000 Units sold Contribution margin per unit Contribution margin ratio 125.000 12000 15,750 950 S 4000 | has the lowest break-even port, primarily due to 600 0 65 Print Done

Answer 1.

Company Q:

Operating Income (loss) = Target Sales - Variable Expenses - Fixed Expenses
$154,000 = $720,000 - $216,000 - Fixed Expenses
Fixed Expenses = $350,000

Contribution Margin per unit = (Target Sales - Variable Expenses) / Units Sold
$6.00 = ($720,000 - $216,000) / Units Sold
Units Sold = 84,000

Contribution Margin Ratio = (Target Sales - Variable Expenses) / Target Sales
Contribution Margin Ratio = ($720,000 - $216,000) / $720,000
Contribution Margin Ratio = 0.70

Company R:

Contribution Margin Ratio = (Target Sales - Variable Expenses) / Target Sales
0.65 = ($400,000 - Variable Expenses) / $400,000
Variable Expenses = $140,000

Operating Income (loss) = Target Sales - Variable Expenses - Fixed Expenses
Operating Income (loss) = $400,000 - $140,000 - $156,000
Operating Income (loss) = $104,000

Contribution Margin per unit = (Target Sales - Variable Expenses) / Units Sold
Contribution Margin per unit = ($400,000 - $140,000) / 125,000
Contribution Margin per unit = $2.08

Company S:

Contribution Margin per unit = (Target Sales - Variable Expenses) / Units Sold
$9.50 = ($190,000 - Variable Expenses) / 12,000
Variable Expenses = $76,000

Operating Income (loss) = Target Sales - Variable Expenses - Fixed Expenses
Operating Income (loss) = $190,000 - $76,000 - $90,000
Operating Income (loss) = $24,000

Contribution Margin Ratio = (Target Sales - Variable Expenses) / Target Sales
Contribution Margin Ratio = ($190,000 - $76,000) / $190,000
Contribution Margin Ratio = 0.60

Company T:

Contribution Margin per unit = (Target Sales - Variable Expenses) / Units Sold
$40.00 = (Target Sales - $270,000) / 15,750
Target Sales = $900,000

Operating Income (loss) = Target Sales - Variable Expenses - Fixed Expenses
$140,000 = $900,000 - $270,000 - Fixed Expenses
Fixed Expenses = $490,000

Contribution Margin Ratio = (Target Sales - Variable Expenses) / Target Sales
Contribution Margin Ratio = ($900,000 - $270,000) / $900,000
Contribution Margin Ratio = 0.70

Answer 2.

Company Q:

Breakeven Point in dollars = Fixed Expenses / Contribution Margin Ratio
Breakeven Point in dollars = $350,000 / 0.70
Breakeven Point in dollars = $500,000

Company R:

Breakeven Point in dollars = Fixed Expenses / Contribution Margin Ratio
Breakeven Point in dollars = $156,000 / 0.65
Breakeven Point in dollars = $240,000

Company S:

Breakeven Point in dollars = Fixed Expenses / Contribution Margin Ratio
Breakeven Point in dollars = $90,000 / 0.60
Breakeven Point in dollars = $150,000

Company T:

Breakeven Point in dollars = Fixed Expenses / Contribution Margin Ratio
Breakeven Point in dollars = $490,000 / 0.70
Breakeven Point in dollars = $700,000

Company S has the lowest break-even point, primarily due to low contribution margin ratio