Question

In November, Tim's Toys, Inc., had direct materials costs of $60,000, direct labor costs of $40,000, manufacturing overhead costs of $64,000, and fixed costs of $152,000. If Tim's contribution margin is $200 per unit, what is the company's break-even point?

a. 820 units
b. $1,520,000
c. $1,640,000
d. 760 units

Answer 1

To calculate the company's break-even point, divide the total costs by the contribution margin per unit. In this case, the break-even point is 1580 units.

Step-by-step explanation:

To calculate the break-even point, you need to determine the number of units that need to be sold in order to cover all costs and achieve zero profits. The break-even point is calculated using the formula:

Break-even Point = Fixed Costs / Contribution Margin per unit

Given that the direct materials costs, direct labor costs, manufacturing overhead costs, and fixed costs are $60,000, $40,000, $64,000, and $152,000 respectively, the total costs can be calculated:

Total Costs = Direct Materials + Direct Labor + Manufacturing Overhead + Fixed Costs = $60,000 + $40,000 + $64,000 + $152,000 = $316,000

Using the contribution margin per unit of $200, the break-even point can be calculated:

Break-even Point = $316,000 / $200 = 1580 units

Therefore, the correct answer is option d. 1580 units.