Question

A firm sells its product for $30 per unit. Its direct material costs are $4 per unit and direct labour costs are $3. Fixed manufacturing overhead costs are $53,880 and variable overhead costs are $11 per unit. Calculate the required sales in dollars to break even.

Answer 1

To calculate the required sales in dollars to break even, sum up the fixed costs and the total variable costs.

Step-by-step explanation:

To calculate the required sales in dollars to break even, we need to determine the total fixed costs and the total variable costs.

1. The total fixed costs are given as $53,880.
2. The total variable costs can be calculated by multiplying the variable overhead cost per unit ($11) by the number of units produced.
3. So, for each unit, the variable cost is $11.
4. The total variable cost for all units can be calculated as $11 multiplied by the number of units.

To break even, the total revenue must cover all costs. The break-even sales can be calculated as the sum of the fixed costs and the total variable costs.