Answer:
Part a. What is the variable cost per unit?
Variable Cost per Unit is $ 11.13+ $ 7.29 = $18.42
Part b. What are the total costs for the year?
Production for the year is 190000 units
Calculation of Total Production = Variable costs + Fixed Costs
= 190000 units × $18.42 + $875,000
=$ 4,374,800
Part c. If the selling price is $44.99 per unit, does the company break even on a cash basis?
The Company Breaks Even when
Total Sales Revenue = Total Production Costs
Total Sales Revenue = $44.99 × 190000
= $ 8,548,100
Total Sales Revenue $ 8,548,100 > Total Production Costs $ 4,374,800
Therefore Company does break even on a cash basis
Part c. If depreciation is $435,000 per year, what is the accounting break-even point?
Total Production Costs = $4,374,800+$435000
= $4,809,800
Therefore accounting break-even point is $4,809,800 Sales
Explanation:
Part a. What is the variable cost per unit?
Variable Cost are costs which Vary with the level of Activity.
Part b. What are the total costs for the year?
Calculation of Total Production Costs= Variable costs + Fixed Costs
Part c. If the selling price is $44.99 per unit, does the company break even on a cash basis?
Break-Even Point is the Point when the company neither makes a profit or a loss
Total Sales Revenue $ 8,548,100 > Total Production Costs $ 4,374,800
Therefore Company does break even on a cash basis
Part c. If depreciation is $435,000 per year, what is the accounting break-even point?
In simple terms the break even point in Sales Revenue is equal to all Variable plus fixed costs
