Units Sold to Break Even, Unit Variable Cost, Unit Manufacturing Cost, Units to

ID: 2509668 • Letter: U

Question

Units Sold to Break Even, Unit Variable Cost, Unit Manufacturing Cost, Units to Earn Target Income

Werner Company produces and sells disposable foil baking pans to retailers for $2.95 per pan. The variable cost per pan is as follows:

Fixed manufacturing cost totals $182,054 per year. Administrative cost (all fixed) totals $24,826.

Required:

1. Compute the number of pans that must be sold for Werner to break even.
pans

2. Conceptual Connection: What is the unit variable cost? What is the unit variable manufacturing cost? Round your answers to the nearest cent.

Which is used in cost-volume-profit analysis?

3. How many pans must be sold for Werner to earn operating income of $13,200?
pans

4. How much sales revenue must Werner have to earn operating income of $13,200?
$

Direct materials $0.30 Direct labor 0.60 Variable factory overhead 0.71 Variable selling expense 0.14

1) Break even point = Fixed cost/contribution margin per unit

Contribution margin per unit = 2.95-1.75 = 1.20 per unit

Fixed cost = 182054+24826 = 206880

Break even point = 206880/1.2 = 172400 unit

2) Unit variable cost = 1.75 per unit

Unit variable manufacturing cost = 1.61 per unit

Unit variable cost is used in cost volume profit analysis.

3) Required unit sales = (13200+206880)/1.2 = 183400 pans

4) Required sales = 183400*2.95 = 541030

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