Question

Panda Toys Inc. plans to sell one line of its panda toys for $ 20. The material cost per unit is $ 4 and unit labor cost is $ 6. The annual overhead fixed costs are $ 500,000 and the promotion and advertising cost is $100,000. What is the $BEP for the company?

Answer 1

The $BEP for the company is $ 1,200,000.

Step-by-step explanation:

The break even is the point of sale after which company generated profit. The break even is calculated by dividing total fixed cost with contribution per unit.

Contribution = Sale price - Variable cost per unit

Contribution = 20 - (4+6) = $ 10 per unit -A

Total fixed cost = 500,000 + 100,000 = 600,000 -B

Break even (units) = 600,000/10 = 60,000 units -C

Break even ($) = C* 20 = $ 1,200,000