Question

Variable costs per unit: Manufacturing: Direct materials $ 26 Direct labor $ 10 Variable manufacturing overhead $ 2 Variable selling and administrative $ 4 Fixed costs per year: Fixed manufacturing overhead $ 987,000 Fixed selling and administrative expense $ 475,000

Answer 1

The company's break even points in unit sales is 43,000 units.

Above the actual sales volume of 42,000 units is the break-even point.

What is Break Even point?

• In economics, business, and particularly cost accounting, the break-even point is the point at which total cost and total income are equal, or "even."

• Although opportunity costs have been paid and capital has received the risk-adjusted, projected return, there is no net loss or gain, and one has "broken even."
• A graph with a function that represents the fixed costs is also helpful.
• No matter how many units are manufactured, the fixed cost is always 1200, hence the fixed costs function is shown as a horizontal line (FC = 1200).
• Any of the following will raise the break-even point: an increase in the quantity of fixed charges or expenses for the business.
• An increase in variable expenditures and expenses per unit. A drop in the selling prices offered by the company.

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