In 2010, Runge Company Had a Break-Even Point of $800,000

question 69

Essay

In 2010, Runge Company had a break-even point of $800,000 based on a selling price of $10 per unit and fixed costs of $240,000. In 2011, the selling price and variable costs per unit did not change, but the break-even point increased to $900,000.
Instructions
(a) Compute the variable cost per unit and the contribution margin ratio for 2010.
(b) Using the contribution margin ratio, compute the increase in fixed costs for 2011.

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Definitions:

Operating Activities

Activities that relate directly to the primary business operations of a company, such as selling products or providing services.

Financing Activities

Transactions that involve raising capital for the business and repaying investors, such as issuing debt and equity or paying dividends.

Financing Activities

Actions that result in changes to the size and composition of the equity capital or borrowings of a company.

Cash Flows

Cash flows represent the movement of money into and out of a business, crucial for understanding liquidity, viability, and overall financial health.