Eibar Inc makes a product that sells for $61 and has $42 per unit in variable co

Question

Eibar Inc makes a product that sells for $61 and has $42 per unit in variable costs. Annual fixed costs are $24,000. If Eibar sells 10 units less than break-even. How much loss would the company realize on its income statement?

A)

$275

B)

$260

C)

$190

D)

$240

Eibar Inc makes a product that sells for $61 and has $42 per unit in variable costs. Annual fixed costs are $24,000. If Eibar sells 10 units less than break-even. How much loss would the company realize on its income statement?

A)

$275

B)

$260

C)

$190

D)

$240

Explanation / Answer

Selling price = $ 61

Variable Cost = $ 42

Contribution per unit = $ 61 - $ 42 = $ 19

BEP = Fixed Cost / Contribution per unit = 24000 / 19 = = 1263 units

If 10 units less from BEP , THEN the units will be = 1263.16 - 10 = 1253.16

Total Contribution = 1253.16 * 19 = $ 23810

Therefore loss = Contribution - Fixed Ccost = 24000 - 23810 = $ 190

Answer is (C) : $ 190

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