Answer:
Rice Company
a) Break-even point in units using the mathematical equation = 906 units
b) Break-even point in units using the unit contribution margin = 906 units
Explanation:
a) Data and Calculations:
Selling price per unit = $730
Variable costs per unit = $500
Contribution margin per unit = $230 ($730 - $500)
Fixed costs for the period = $208,400
Break-even point in units:
a) Mathematical equation:
(Total Revenue = Expenses at the BEP)/
Profit = Selling price − Variable Expenses − Fixed Expenses
$
0 = Unit CM * Q − Fixed expenses
$
0 = $
230 * Q − $208,400
$208,400 = $230 * Q
= $230Q = $208,400
= Q = $208,400/$230
= 906 units
b) Unit contribution margin:
Break-Even point (units) = Fixed Costs ÷ (Sales price per unit – Variable costs per unit)
= $208,400/ ($730 - $500)
= 906 units
