Question 1 - Units Sold to Break Even, Unit Variable Cost, Unit Manufacturing Co

Question

Question 1 - Units Sold to Break Even, Unit Variable Cost, Unit Manufacturing Cost, Units to Earn Target Income

Prachi Company produces and sells disposable foil baking pans to retailers for $3.00 per pan. The variable cost per pan is as follows:

Fixed manufacturing costs totals $286,334 per year. Administrative cost (all fixed) totals $39,046.

Required:

1. Compute the number of pans that must be sold for Prachi 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.

3. How many units must be sold for Prachi to earn operating income of $11,880?
pans

4. How much sales revenue must Prachi have to earn operating income of $11,880?
$

Question 2:Multiple-Product Breakeven

Peace River Products Inc. produces and sells yoga-training products: how-to DVDs and a basic equipment set (blocks, strap, and small pillows). Last year, Peace River Products sold 18,000 DVDs and 4,500 equipment sets. Information on the two products is as follows:

Total fixed cost is $90,000.

Required:

1. What is the sales mix of DVDs and equipment sets? 4:1

2. Compute the break-even quantity of each product. If required, round your calculations and answers to nearest whole value.

Margin of Safety

Head-First Company plans to sell 5,000 bicycle helmets at $72 each in the coming year. Unit variable cost is $45 (includes direct materials, direct labor, variable factory overhead, and variable selling expense). Total fixed cost equals $49,500 (includes fixed factory overhead and fixed selling and administrative expense). Break-even units equal 1,833.

Required:

1. Calculate the margin of safety in terms of the number of units.
units

2. Calculate the margin of safety in terms of sales revenue.

$

Direct materials $0.29 Direct labor 0.62 Variable factory overhead 0.62 Variable selling expense 0.15

Explanation / Answer

Required:

1. Compute the number of pans that must be sold for Prachi to break even. pans = 246500

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

Unit variable manufacturing cost = $0.91

Unit variable cost = $1.68

3. How many units must be sold for Prachi to earn operating income of $11,880?

pans = 255439.39

4. How much sales revenue must Prachi have to earn operating income of $11,880?
$766318.18

Required:

1. What is the sales mix of DVDs and equipment sets? 13:14

2. Compute the break-even quantity of each product. If required, round your calculations and answers to nearest whole value.

Required:

1. Calculate the margin of safety in terms of the number of units. 63.34% = 3167units

2. Calculate the margin of safety in terms of sales revenue. $228,024

Break-even DVDs units = 10000

Break-even equipment sets units = 11250

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