Question

The following totals are used to create a CVP Income Statement for Frederick Company for FY2018:

Frederick Company

Selected Financial Figures

For the Year Ended 12/31/18 Sales (100 units) $10,000 Variable Costs:      Direct Labor $1,050      Direct Materials 1,600      Factory Overhead (variable) 2,000      Selling Expenses (variable) 600      Administrative Expenses (variable) 500 Fixed Costs:      Factory Overhead (fixed) $850      Selling Expenses (fixed) 1,000      Administrative Expenses (fixed) 1,000 Frederick Company utilizes a JIT production system and there are no Raw Materials, Work-in-Process or Finished Goods inventories. Use this information to determine the FY 2016 breakeven point in units. Round and enter as a whole number.

Answer 1

In the given case, the units sold amount = 100 units and the sales amount = $ 10,000 , thus the sales price per unit = $100 per unit.

Here the information regarding the sales , variable cost and fixed cost are given which will be given in a scheduled form as follows:

	Amount	Cost per unit
Sales	$10,000	$100
Less: Variable cost
Direct Labor	$1,050	$10.50
Direct Material	$1,600	$16.00
Factory Overhead (Variable)	$2,000	$20.00
Selling Expenses ( variable)	$600	$6.00
Administrative expenses (variable)	$500	$5.00
Total Variable cost	$5,750	$57.50
Contribution Margin	$4,250	$42.50
Less : Fixed cost
Factory Overhead (fixed)	$850	$8.50
Selling Expenses ( fixed)	$1,000	$10.00
Administrative expenses (fixed)	$1,000	$10.00
Total Fixed cost	$2,850	$28.50
Operating Income	$1,400	$14

Here the contribution margin per unit = $ 42.50 and Fixed cost amount = $ 2850.

Now, Break even point in units = Fixed cost / Contribution margin per unit.

Break even point in units = $ 2850 / 42.50

Break even point in units = 67 units.

Feel free to comment doubts if any..