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 units? How many unit must be sold to yield targated income of $36000?

Answer 1

(1) break even point(units) = 8000 units

(2) units to be sold to yield $36000 = 14000 units

Step-by-step explanation:

(1) BEP = FC/ unit contribution

where, FC ; 13000+35000 = 48000

unit contribution; 10-(1.5+1.2+0.9+0.4) = $6

BEP = $48000/$6 = 8000 units.

(2) Target sales =(FC + target income)/ unit contribution

= ($48000+$36000)/$6

= 14000 units.