8 Required information The Foundational 15 [LO6-1, LO6-2, LO6-3, LO6-4, LO6-5) P

Question

8 Required information The Foundational 15 [LO6-1, LO6-2, LO6-3, LO6-4, LO6-5) Part 8 of 15 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 points Variable costs per unit: eBook Manufacturing: 21 10 Direct materials Direct labor Variable manufacturing Print 2 overhead Variable selling and administrative Reference Fixed costs per year: Fixed manufacturing overhead $1,060,000 Fixed selling and administrative expense $ 557,000 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 expense is traceable to the West region, $220,000 is traceable to the East region, and the remaining $67,000 is a common fixed expense. 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. Foundational 6-8 a. What is the company's break-even point in unit sales? Break even units nt b. Is it above or below the actual unit sales? Above Below

Explanation / Answer

Solution a:

Selling price per unit = $70

Variable cost per unit = $21 + $10 + $2 + $4 = $37

Contribution margin per unit = Selling price per unit - Variable cost per unit = $70 - $37 = $33 per unit

Total Fixed cost = Fixed manufacturing overhead + Fixed selling and administrative expense

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

Breakeven point in units sales = Fixed cost / contribution per unit = $1,617,000 / $33 = 49000 units

Solution b:

Current level of sales = 48000 units

Breakeven sales = 49000 units

Therefore breakeven point is above the actual unit sales.

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