Rosewood company sells wooden carvings for $300 each. The direct materials cost per unit is $160 and the direct labor is 2 hours at a rate of $26 per hour. Manufacturing overhead is applied on the basis of labor hours at a rate of $36 per hour. Rosewood makes and sells 1,000 units per period. How many units must Rosewood sell to breakeven?

Question

Quizplus · Accepted Answer

Correct. Unit Contribution Margin 300 - 160 - (2 x $26) = $88
Fixed cost per period = (2 x $36) x 1,000 units = $72,000
Breakeven = FC / CM = $72,000 / $88 = 818 units

Rosewood Company Sells Wooden Carvings for $300 Each