Wilson's Meats has fixed costs of $.60 for every pound of meat it sells given a sales level of 32,500 pounds.It charges $3.89 per pound while the variable cost per pound is $2.99.If depreciation is $16,400,what is the accounting profit break-even point?
A)31,948 pounds
B)32,467 pounds
C)39,889 pounds
D)42,650 pounds
E)37,338 pounds

Question

Quizplus · Accepted Answer

First, we need to find the contribution margin per pound by subtracting variable cost per pound from the selling price per pound: 
Contribution margin per pound = $3.89 - $2.99 = $0.90.

Next, we need to find the total fixed costs: 
Fixed costs = $0.60 x 32,500 + $16,400 = $35,900.

To find the break-even point in pounds, we divide total fixed costs by the contribution margin per pound: 
Breakeven point in pounds = $35,900 ÷ $0.90 = 39,889 pounds.

Therefore, the best choice is (C) 39,889 pounds because this is the sales level at which Wilson's Meats will earn zero accounting profit (i.e. it covers all its costs but does not make a profit).

Wilson's Meats Has Fixed Costs of