In 2015, X Company had the following selling price and per-unit variable cost in

Question

In 2015, X Company had the following selling price and per-unit variable cost information:

In 2015, fixed overhead costs were $374,000, and fixed selling and administrative costs were $260,000.

In 2016, there are only two expected changes. Direct material costs are expected to decrease by 20% per unit, and fixed selling and administrative costs are expected to increase by $20,000. What must unit sales be in order for X Company to break even in 2016?

Selling price $186.00 Direct materials 43.10 Direct labor 14.30 Variable overhead 24.20 Variable selling and administrative 16.90

Explanation / Answer

Fixed Overhead COst = $374000 and Fixed Selling and Administraive COst = 260000+20000 = $280000

Break even unit sales = (374000+280000)/contribution MArgin Per unit

Break even sales unit = 654000/96.12 = 6804 units

Sales 186 Less VArialbe Production cost less Direct MAterial (43.10x20% = 8.62) = 43.20-8.62 34.48 less Direct Labour 14.30 less Variable Overhead 24.20 less VAriable Seling and Administrative Expense 16.90 Contribution MArgin per unit 96.12

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