Clone Computers assembles and packages personal computer systems from brandname

Question

Clone Computers assembles and packages personal computer systems from brandname components. Its Home Office PC System is assembled from components costing $1400 per system and sells for $2000. Labour costs for assembly are $100 per system. This product line’s share of overhead costs is $10,000 per month. a. How many Home Office Systems must be sold each month to break even on this product line? b. What will be the profit or loss for a month in which 15 Home Office Systems are sold? Clone Computers assembles and packages personal computer systems from brandname components. Its Home Office PC System is assembled from components costing $1400 per system and sells for $2000. Labour costs for assembly are $100 per system. This product line’s share of overhead costs is $10,000 per month. a. How many Home Office Systems must be sold each month to break even on this product line? b. What will be the profit or loss for a month in which 15 Home Office Systems are sold?

Explanation / Answer

Answer:

Selling Price : 2000 $ per system

Component Cost = 1400 $ per System

And Labour Cost is 100 $ per system

So Contribution per system is 2000-1400-100 = 500 $ per system

Also Break Even Sale is Fixedcost/Contribution per unit so here breakeven sale will be 10000/500 = 20 Computers

b.

If 15 Home Office Systems were sold the contribution earned will be 15*500 = 7500$

But fixed cost to be recover is 10000$

So Clone computer will be in loss for 7500-10000 = 2500 $ Loss

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