[The following information applies to the questions displayed below.] Diego Comp

Question

[The following information applies to the questions displayed below.]

Diego Company manufactures one product that is sold for $70 per unit in two geographic regions—the East and West regions. The following information pertains to the company’s first year of operations in which it produced 53,000 units and sold 48,000 units.

The company sold 36,000 units in the East region and 12,000 units in the West region. It determined that $270,000 of its fixed selling and administrative expenses is traceable to the West region, $220,000 is traceable to the East region, and the remaining $67,000 is a common fixed cost. The company will continue to incur the total amount of its fixed manufacturing overhead costs as long as it continues to produce any amount of its only product

Question: what is the companies break-even point in unit sales?

Diego Company manufactures one product that is sold for $70 per unit in two geographic regions—the East and West regions. The following information pertains to the company’s first year of operations in which it produced 53,000 units and sold 48,000 units.

Explanation / Answer

Solution-

Profit = Unit Contribution Margin * Q - Fixed Expense

$0 = ($70 - $37*) * Q - $1,617,000

$0 =($33) * Q - $1,617,000**

$33Q = $1,617,000

Q = $1,617,000 / $33

Q = 49,000 Units

Break-even point in unit sales = 49,000 Units

Calculation-

*$21+10+2+4 = $37*

**$1,060,000 + $557,000 = $1,617,000

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