Question

A manufacturer of tiling grout has supplied the following data: Kilograms produced and sold 380,000 Sales revenue $ 2,736,000 Variable manufacturing expense $ 1,349,000 Fixed manufacturing expense $ 336,000 Variable selling and administrative expense $ 399,000 Fixed selling and administrative expense $ 372,000 Net operating income $ 280,000 The company's break-even in unit sales is closest to:

Answer 1

Answer:

Break-even point in units= 272,308 units

Explanation:

Giving the following information:

Variable manufacturing expense $ 1,349,000

Variable selling and administrative expense $ 399,000

Total variable cost= 1,748,000

Fixed manufacturing expense $ 336,000

Fixed selling and administrative expense $ 372,000

Total fixed costs= 708,000

First, we need to calculate the unitary selling price and unitary variable cost:

Unitary selling price= 2,736,000/380,000= $7.2

Unitary variable cost= 1,748,000/380,000= $4.6

Now, 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= 708,000 / (7.2 - 4.6)

Break-even point in units= 272,308 units