Ms. Janice Meyers, the company president, has heard that there are multiple brea
ID: 2583586 • Letter: M
Question
Ms. Janice Meyers, the company president, has heard that there are multiple breakeven points for every product. She does not believe this and has asked you to provide the evidence of such a possibility. Some information about the company for 2011 is as follows:
Total fixed manufacturing overhead $182,000
Total other fixed expenses $205,000
Total variable manufacturing expenses $280,000
Total other variable expenses $260,000
Units produced 70,000 units
Budgeted production 70,000 units
Units sold 55,000 units
Selling price $44
What are breakeven sales in units using variable costing?
Explanation / Answer
Break Even Point = Total Fixed Cost / Contribution Margin Per Unit
= ( Total fixed manufacturing overhead +Total other fixed expenses) / Contribution Margin Per Unit
= ($ 182,000 + $ 205,000)/ ( 36.2857142858)
= 10,665.3543306 Units
= 10,665 Units
Hence the correct answer is $ 10,655 Units
Note :
Total variable manufacturing expenses + Total other variable expenses = Total Variable Cost
= $ 280,000 + $ 260,000
= $ 540,000
Units produced = 70,000 Units
Hence, Variable Cost Per Unit = $ 540,000 /70,000 Units
= $ 7.71428571428
Contribution Margin Per Unit= Selling Price Per Unit - Variable Cost Per Unit
= $ 44 - $ 7.71428571428
=$ 36.2857142858
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