Answer the following questions using the information below: Ms. Andrea Chadwick,

Question

Answer the following questions using the information below: Ms. Andrea Chadwick, the company president, has heard that there are multiple breakeven points for every product. Sho does not believe this and has asked you to provide the evidence of such a possibility. Some information about the company for 20X5 is as follows: Total fixed manufacturing overhead Total other fixed expenses Total variable manufacturing expenses Total other variable expenses Units produced Budgeted production Units sold Selling price $180,000 $200,000 $120,000 $120,000 30,000 units 30,000 units 25,000 units $40

Explanation / Answer

Answer - 7692 Units

Contribution margin = sale price – variable fixed overhead per unit – other variable expenses per unit

= 40 – (120,000/30,000) – (120,000 / 30,000)

= 32 per unit

Let no. of break even units = X

Break even = [Fixed cost + other fixed cost / production units * (X – production units)] / contribution margin per unit

X = [380,000 + 180,000 / 30,000 * (X – 30,000)] / 32

X = [380,000 + 6X – 180,000] / 32

32X = 200,000 + 6X

X = 7692 Units

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