Figure 4-3. Paney Company makes calendars.Information on cost per unit is as follows:
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?

Question

Figure 4-3. Paney Company makes calendars.Information on cost per unit is as follows:
 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?

Quizplus · Accepted Answer

Calculation of contribution margin per unit:
Price per unit - Variable cost per unit = Contribution margin per unit
$10 - $3 - $1 - $1 = $5
($3 for direct materials, $1 for direct labor, and $1 for variable overhead)
Calculation of break-even point in units:
Fixed costs / Contribution margin per unit = Break-even point in units
($13,000 + $35,000) / $5 = 8,000 units