2. The new CM ratio will be:
Selling price ... $25 100%
Less variable expenses ... 18 72
Contribution margin... $ 7 28%
The new break-even point will be:
Sales = Variable expenses + Fixed expenses + Profits
$25Q = $18Q + $210,000 + $0
$7Q = $210,000
Q = $210,000 ÷ $7 per ball
Q = 30,000 balls
Problem 6-24 (continued)
Alternative solution:
Fixed expenses
Break-even point= in unit sales Unit contribution margin
$210,000
= =30,000 balls
$7 per ball
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