Final answer:
The fixed costs at the accounting break-even point for Reneau & Company are $231,220, calculated by deducting the total variable costs ($137,640) and depreciation ($67,000) from the total revenue ($435,860) achieved at the break-even sales volume of 22,940 ski masks sold at a price of $19 each.
Step-by-step explanation:
To determine the amount of fixed costs at the accounting break-even point for Reneau & Company, we need to understand the concept of the accounting break-even point. This is the point where the company's total revenues equal its total costs, covering both variable and fixed costs but not including any profit
The company sells ski masks at a price of $19 each, with the break-even sales volume at 22,940 units. Variable costs are $6 per unit and depreciation, a non-cash fixed cost, is $67,000. The formula to calculate total revenue at the break-even point is:
Total Revenue = Price per Unit × Quantity Sold
Total Costs = (Variable Cost per Unit × Quantity Sold) + Fixed Costs + Depreciation
At break-even:
Total Revenue = Total Costs
So we could express it as follows:
$19 × 22,940 = ($6 × 22,940) + Fixed Costs + $67,000
Calculating both sides of the equation:
$435,860 = $137,640 + Fixed Costs + $67,000
Now let's isolate the Fixed Costs:
Fixed Costs = $435,860 - $137,640 - $67,000
Fixed Costs = $435,860 - $204,640
Fixed Costs = $231,220
Therefore, at the accounting break-even point, the amount of fixed costs at this production level for Reneau & Company is $231,220.