Question

Paney Company makes and sells calendars. The information on the cost per unit is as follows: Direct materials $1.50 Direct labor 1.20 Variable overhead 0.90 Variable marketing expense 0.40 The fixed marketing expense totaled $13,000, and the fixed administrative expense totaled $35,000. The price per calendar is $10. What is the break-even point in sales dollars? a.$58,330 b.$80,000 c.$120,000 d.$28,000 e.$21,670

Answer 1

Answer:

Break-even point (dollars)= $80,000

Explanation:

Giving the following information:

Variable costs:

Direct materials $1.50

Direct labor 1.20

Variable overhead 0.90

Variable marketing expense 0.40

Total variable costs= 4

Fixed costs:

The fixed marketing expense totaled $13,000

The fixed administrative expense totaled $35,000.

Total fixed costs= $48,000

The price per calendar is $10.

To calculate the break-even point in dollars, we need to use the following formula:

Break-even point (dollars)= fixed costs/ contribution margin ratio

Break-even point (dollars)= 48,000/ [(10 - 4)/10]

Break-even point (dollars)= 48,000/0.6

Break-even point (dollars)= $80,000