Lucent Manufacturing Company makes a product that it sells for $67 per unit. The
ID: 2462894 • Letter: L
Question
Lucent Manufacturing Company makes a product that it sells for $67 per unit. The company incurs variable manufacturing costs of $11 per unit. Variable selling expenses are $11 per unit, annual fixed manufacturing costs are $180,000, and fixed selling and administrative costs are $433,350 per year.
Lucent Manufacturing Company makes a product that it sells for $67 per unit. The company incurs variable manufacturing costs of $11 per unit. Variable selling expenses are $11 per unit, annual fixed manufacturing costs are $180,000, and fixed selling and administrative costs are $433,350 per year.
Explanation / Answer
Lucent Manufacturing Company a Equation Method Break even point in units 13,630 Break even point in dollars (13 630 x 67) $ 9,13,210 workings: Break Even Point (BEP) px = vx + FC + Profit where p = selling price per unit v= variable cost per unit FC = Fixed cost x = number of units Note: Profit will be zero at BEP $ 67 X = ($ 11 + $ 11)x + ($180,000 + $ 433, 350) + 0 $ 67X = $ 22X + $ 613 350 X = $ 613,350/ $ 45 X = 13,630 units b Contribution margin per unit approach Contribution margin per unit $ 45 Break even point in units 13,630 Break even point in dollars (13 630 x 67) $ 9,13,210 workings Contribution margin per unit = selling price per unit - variable cost per unit = $ 67 - $ 22 $ 45 per unit B E P in units = Fixed cost / contribution margin per unit $ 613,350 / $ 45 13630 units BEP in dollars = Fixed cost / Profit volume (PV) Ratio PV Ratio = contribution margin per unit / selling price per unit x 100 $ 45 / $ 67 x 100 67.16% BEP in dollars = Fixed cost / Profit volume (PV) Ratio 613,350 /67.16% $ 9,13,171.65 c Contribution margin income statement for the break even volume Sales ( 13, 630 x $ 67) $ 9,13,210 Less Variable cost ( 13,630 x $ 22) $ 2,99,860 Contribution Margin $ 6,13,350 Less: Fixed Cost $ 6,13,350 Net Income $ -
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