Question

Amish Enterprises makes wooden play sets. The company pays annual rent of $350,000 per year and pays administrative salaries totaling $120,000 per year. Each play set requires $300 of wood, ten hours of labor at $50 per hour, and variable overhead costs of $50. Fixed advertising expenses equal $40,000 per year. Each play set sells for $2,350. What is Amish Enterprises' break-even output level

Answer 1

Break-even point in units= 340 units

Step-by-step explanation:

Giving the following information:

Fixed costs:

rent= $350,000 per year

Administrative salaries= $120,000 per year.

Fixed advertising expenses= $40,000 per year.

Total fixed costs= $510,000

Variable cost per unit:

Direct material= $300

Direct labor= $50*10= $500

Variable overhead costs= $50

Total unitary costs= $850

Selling price per unit= $2,350.

To calculate the break-even point in units, we need to use the following formula:

Break-even point in units= fixed costs/ contribution margin per unit

Break-even point in units= 510,000 / (2,350 - 850)

Break-even point in units= 340 units