Question

Hurst Co. manufactures and sells a single product. Price and cost data regarding this product are as follows: $40 per unit $20 per unit $6 per unit $208,000 per year $324,000 per year Variable manufacturing costs Variable selling & admin. expenses Fixed manufacturing overhead Fixed selling & admin. expenses The break-even point in units per year is: a. 40,000. Ob. 26,600. c. 15,200. Od. 38,000. Selling price

Answer 1

The break-even point for Hurst Co. is calculated using the contribution margin method. After finding the contribution margin per unit by subtracting variable costs from the selling price, the fixed costs are divided by this margin to find the break-even quantity, which is 38,000 units.

Step-by-step explanation:

The question is about calculating the break-even point for a company that manufactures and sells a single product. To find the break-even point in units, we need to use the contribution margin method, which is the selling price per unit minus the variable costs per unit. The fixed costs are then divided by the contribution margin per unit to find the break-even quantity. Here's the calculation in detail:

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• Contribution Margin per Unit = Selling Price per Unit - (Variable Manufacturing Costs per Unit + Variable Selling & Admin Expenses per Unit)
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• Contribution Margin per Unit = $40 - ($20 + $6) = $14
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• Break-even Point in Units = Fixed Costs / Contribution Margin per Unit
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• Break-even Point in Units = ($208,000 + $324,000) / $14
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• Break-even Point in Units = $532,000 / $14
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• Break-even Point in Units = 38,000

Thus, the break-even point in units per year for Hurst Co. is 38,000 units.