Renew Turf, Inc., enters into a contract with Sports Park to provide surface material for Sports Park's baseball fields by Octob
1 answer:
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Answer:
a. $25.50
b. $9,725,000
c. Cash = 8,888.89 units
Accounting = 35,555.56 units
Explanation:
a. Variable cost per unit = material cost + labor cost = $18.50 + $7.00 = $25.50
b. Total cost = Fixed + Variable
Variable = $25.50 350,000 = $8,925,000
Fixed = $800,000
Total = $800,000 + $8,925,000 = $9,725,000.00
c. Cash break even point = (Fixed cost - Depreciation)/Contribution per unit
Fixed cost = $800,000
Depreciation = $600,000
Contribution per unit = $48 (Selling price) - $25.50 (Variable cost) = $22.5
Cash Break even point = ($800,000 - $600,000)/$22.5 = 8,888.89 units
Accounting Break Even Point = Total fixed cost/ Contribution per unit
=$800,000/$22.5 = 35,555.56 units
Final Answer
a. $25.50
b. $9,725,000
c. Cash = 8,888.89 units
Accounting = 35,555.56 units