Question

XYZ company sells wooden carvings for $300 each. The direct materials cost per unit is $160 and the direct labor per unit is 2 hours at a rate of $26 per hour. Manufacturing overhead (all fixed costs) is applied based on labor hours at a rate of $36 per hour. XYZ makes and sells 1,000 units per period. How many units must XYZ sell to breakeven

Answer 1

Answer:

818 units

Explanation:

Unit Contribution margin

= 300 - 160 - (2 × $26)

= $88

Fixed cost period

= (2 × $36) × 1,000 units

= $72,000

Break even = Fixed cost / Contribution margin

Break even = $72,000 / $88

Break even = 818 units

Therefore, XYZ company must sell 818 units to break even.