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Softa [21]
3 years ago
10

A company has two options for manufacturing boots. The manual process has monthly fixed costs of $26,380 and variable costs of $

5.16 per pair of boots and an automated process with fixed costs of $52,239 per month and variable costs of $2.09 per pair of boots. They expect to sell each pair of boots for $99. What is the monthly break-even quantity (number of units) for the manual process
Business
1 answer:
oee [108]3 years ago
6 0

Answer:

Break-even point for the manual process= 281.11 unit

Explanation:

<em>Break-even point is the level of activity at which a firm must operate such that its total revenue will equal its total costs. At this point, the company makes no profit or loss because the total contribution exactly equals the total fixed costs</em>.

Break even point in units is calculated using this formula:  

Break even point in units = Total general fixed cost/ (selling price - Variable cost)

Break-even point for the manual process:

Break-even point in units = $26,380/(99- 5.16) = 281.11 units

Break-even point for the manual process= 281.11 units

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Martinez Company’s relevant range of production is 7,500 units to 12,500 units. When it produces and sells 10,000 units, its ave
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1. Total amount of product costs for 10,000 units:

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2. Period costs for 10,000 units:

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7. Average fixed manufacturing cost per unit produced for 8,000 units:

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8. Average fixed manufacturing cost per unit produced for 12,500 units:

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11. Total amount of manufacturing overhead costs for 8,000 units:

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= $44,800

per unit = $5.60

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Fixed manufacturing overhead =     $4.00

Total per unit =                                  $5.60

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= 12,500 x $5.60

= $70,000

per unit = $5.60

Variable manufacturing overhead = $1.60

Fixed manufacturing overhead =     $4.00

Total per unit =                                  $5.60

13. Contribution margin per unit:

Selling price =                                          $21.40

Variable manufacturing cost per unit =  $9.90

Contribution margin per unit                  $11.50

14. Total amounts of direct and indirect manufacturing costs for 12,000 units:

Direct manufacturing costs = $9.90 x 12,000 =   $118,800

Indirect manufacturing costs = $4.00 x 12,000 = $48,000

15. Incremental manufacturing cost if Martinez increases production from 10,000 to 10,001:

= $9.90

Explanation:

a) Data and Calculations:

Average Cost Per Unit

Direct materials                              $ 5.40

Direct labor                                     $ 2.90

Variable manufacturing overhead $ 1.60

Total Variable Costs per unit        $ 9.90

Fixed manufacturing overhead    $ 4.00

Total product cost per unit          $13.90

Period Costs:

Fixed selling expense                   $ 2.40

Fixed administrative expense       $ 2.10

Sales commissions                         $ 1.10

Variable administrative expense $ 0.55

Total period costs  per unit           $6.15

All Variable costs:

Variable production costs             $9.90

Sales Commission                           $1.10

Variable administrative expense $ 0.55

Total Variable costs                      $11.55

All Fixed Costs:

Fixed manufacturing overhead    $ 4.00

Fixed selling expense                   $ 2.40

Fixed administrative expense       $ 2.10

Total fixed costs per unit               $8.50

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