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

Question

Required information The Foundational 15 [LO6-1, LO6-2, LO6-3, LO6-4, LO6-5) [The following information applies to the questions displayed below. Diego Company manufactures one product that is sold for $79 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 50,000 units and sold 45,000 units Variable costs per unit: Manufacturing: 29 16 Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative Fixed costs per year: Fixed manufacturing overhead Fixed selling and administrative expense 800,000 516,000 The company sold 35,000 units in the East region and 10,000 units in the West region. It determined that $240,000 of its fixed selling and administrative expense is traceable to the West region, $190,000 is traceable to the East region, and the remaining $86,000 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. oundational 6-8 . What is the company's break-even point in unit sales? Break even point 41,125 units

Explanation / Answer

Sale per unit = $79

Contribution Margin per unit = Sale per unit - Variable costs per unit = 79-51 = $28

Total fixed costs = Fixed manufacturing overhead + Fixed selling and administrative expenses = 800,000+516,000 = $1,316,000

Company's break even point in unit sales = Total fixed costs ÷ Contribution Margin per unit = 1,316,000÷28 = 47,000 units

Direct materials $29 Direct labor 16 Variable manufacturing overhead 2 Variable selling and administrative 4   Variable costs per unit $51

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