Sutton Hot Dog Stand sells hot dogs for $1.35. Variable costs are $1.05 per unit
ID: 2469519 • Letter: S
Question
Sutton Hot Dog Stand sells hot dogs for $1.35. Variable costs are $1.05 per unit with fixed production costs of $90,000 per month at a level of 400,000 units. Fixed administrative costs total $30,000. Sales average 400,000 units per month, with planned production of 400,000 hot dogs.
Required: a. What are breakeven unit sales under variable costing?
b. What are breakeven unit sales under absorption costing if she sells everything she prepares?
c. What are breakeven unit sales under absorption costing if average sales are 498,000 and planned production is changed to 500,000?
Please how did you do it
Explanation / Answer
Sale Price 1.35 Variable cost 1.05 Contribution Margin 0.3 ans a BEP in units = Fixed Cost/ Contribution Per unit =90000/0.3 300000 ans b BEP in $ under absorption costing = Fixed Cost + Variable Cost =(90000)+(1.05*400000) 510000 Selling Price 1.35 BEP in units under absorption costing 377778 ans c BEP in $ under absorption costing = Fixed Cost + Variable Cost-Closing Stock =(90000)+(1.05*500000) =(90000)+(1.05*500000)-(2000*1.05) 612900 Selling Price 1.35 BEP in units under absorption costing 454000
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