Question

Paney Company makes calendars. Information on cost per unit is as follows: Direct materials $1.50 Direct labor 1.20 Variable overhead 0.90 Variable marketing expense 0.40 Fixed marketing expense totaled $13,000 and fixed administrative expense totaled $35,000. The price per calendar is $10. What is the break-even point in sales dollars? a.$80,000 b.$58,330 c.$21,670 d.$28,000 e.$120,000

Answer 1

c.$21,670

Step-by-step explanation:

The computation of the break-even point in sales dollars is shown below:

Break even point = (Fixed expenses) ÷ (Profit volume Ratio)

where,

Contribution margin per unit = Selling price per unit - Variable expense per unit

= $10 -$1.50 -$1.20 - $0.90 - $0.40

= $6

And, Profit volume ratio = (Contribution margin per unit) ÷ (selling price per unit) × 100

So, the Profit volume ratio = (6) ÷ (10) × 100 = 60%

And, the fixed expenses is $13,000

Now put these values to the above formula

So, the value would equal to

= ($13,000) ÷ (60%)

= $21,670