Question

Paney Company makes calendars. Information on cost per unit is as follows: Direct materials $1.50 Direct labor 1.20 Variable overhead 0.90 Variable marketing expense 0.40 Fixed marketing expense totaled $13,000 and fixed administrative expense totaled $35,000. The price per calendar is $10. Refer to Figure 4-3. What is the break-even point in units?

Answer 1

Variable cost per unit:
Direct materials	=	$       1.50
Direct labor	=	$       1.20
Variable overhead	=	$       0.90
Variable marketing expense	=	$       0.40
Total Variable cost per unit	=	$             4
Price per Calendar	=	$          10
Contribution Margin Per unit	=	Price per unit - Variable cost per unit
	=	$10 - $4
	=	$             6
Fixed cost:
Fixed marketing expense	=	$ 13,000
Fixed Administrative expense	=	$ 35,000
Total Fixed cost	=	$ 48,000
Break - even point in units	=	Total Fixed cost / Contribution Margin Per unit
	=	$48,000 / $6
	=	8,000	units
Therefore, Break - even point in units is 8,000 units.