Problem 6-26 (continued)

3.

Unit
Unit
Unit
Selling Variable Contribution
Price Expense
Margin
$70
$40
$30
$68
$40
$28
$66
$40
$26
$64
$40
$24
$62
$40
$22
$60
$40
$20
$58
$40
$18
$56
$40
$16

Volume
(Units)
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000

Total
Contribution
Margin
$450,000
$560,000
$650,000
$720,000
$770,000
$800,000
$810,000
$800,000

Fixed
Expenses
$540,000
$540,000
$540,000
$540,000
$540,000
$540,000
$540,000
$540,000

Net
operating
income
($90,000)
$20,000
$110,000
$180,000
$230,000
$260,000
$270,000
$260,000

The maximum profit is $270,000. This level of profit can be earned by selling 45,000 units at a price
of $58 each.

The McGraw-Hill Companies, Inc., 2010. All rights reserved.

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Managerial Accounting, 13th Edition