Question: Basic Break-Even Calculations Suppose that Adams Company sells a product for $20. Unit costs are as follows:

Direct materials                                         $3.90

Direct labor                                                1.40

Variable factory overhead                             2.10

Variable selling and administrative expense       1.60

Total fixed factory overhead is $52,000 per year, and total fixed selling and administrative expense is $38,530.

Required: 1. Calculate the variable cost per unit and the contribution margin per unit.

2. Calculate the contribution margin ratio and the variable cost ratio.

3. Calculate the break-even units.

4. Prepare a contribution margin income statement at the break-even number of units.