Francis Corporation is having trouble selling its inventory because of its ongoing dispute with its logistical partner. The company was not able to sell any inventory in the month of January because of the dispute. It manufactured 8,000 units in January. Francis had no other fixed costs commitment other than fixed manufacturing costs of $100,000. It follows absorption costing. If actual production in January was equal to the denominator level, what is the amount of sales required to attain breakeven point?
A) 1250 units
B) 125 units
C) 10 units
D) 0 units

Question

Quizplus · Accepted Answer

All the units produced would be placed in inventory, so all the fixed manufacturing costs would be included in inventory. There would be no production-volume variance. Under these conditions, the company could break even under absorption costing with no sales whatsoever.

Francis Corporation Is Having Trouble Selling Its Inventory Because of Its