Break-Even Units, Operating Income, Margin of Safety Kallard Manufacturing Compa

Question

Break-Even Units, Operating Income, Margin of Safety

Kallard Manufacturing Company produces t-shirts screen-printed with the logos of various sports teams. Each shirt is priced at $13.50 and has a unit variable cost of $9.85. Total fixed cost is $197,600.

1. Compute the break-even point in units. Round your answer to the nearest whole unit.

2. Suppose that Kallard could reduce its fixed costs by $23,500 by reducing the amount of setup and engineering time needed. How many units must be sold to break even in this case? Round your answer to the nearest whole unit.

Explanation / Answer

Contribution=Sales-VC

=(13.5-9.85)=$3.65

1.Breakeven=Fixed cost/Contribution

=(197600/3.65)=54137 units(Approx).

2.Breakeven=(197600-23500)/3.65=47699 units(Approx).

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