Hurst Co. manufactures and sells a single product. Price and cost data regarding this product are as follows:$\begin{array}{|l|r|}
\hline \text { Selling price } & \$ 40 \text { per unit } \
\hline \text { Variable manufacturing cost } & \$ 20 \text { per unit } \
\hline \text { Variable selling \& administrative expenses } & \$ 6 \text { per unit } \
\hline \text { Fixed manufacturing overhead } & \$ 208,000 \text { per year } \
\hline \text { Fixed selling \& administrative expenses } & \$ 324,000 \text { per year } \
\hline
\end{array}$

-What is the break-even point in units per year?

Question

Hurst Co. manufactures and sells a single product. Price and cost data regarding this product are as follows:$\begin{array}{|l|r|}
\hline \text { Selling price } & \$ 40 \text { per unit } \
\hline \text { Variable manufacturing cost } & \$ 20 \text { per unit } \
\hline \text { Variable selling \& administrative expenses } & \$ 6 \text { per unit } \
\hline \text { Fixed manufacturing overhead } & \$ 208,000 \text { per year } \
\hline \text { Fixed selling \& administrative expenses } & \$ 324,000 \text { per year } \
\hline
\end{array}$

-What is the break-even point in units per year?

Quizplus · Accepted Answer

The break-even point in units is calculated by dividing the total fixed costs by the contribution margin per unit. The contribution margin per unit is the selling price minus the variable costs (both manufacturing and selling & administrative). Here, it is $40 - ($20 + $6) = $14. The total fixed costs are $208,000 + $324,000 = $532,000. Thus, the break-even point is $532,000 / $14 = 38,000 units.

Hurst Co Manufactures and Sells a Single Product -What Is the Break-Even Point in Units Per Year? A)

Hurst Co Manufactures and Sells a Single Product -What Is the Break-Even Point in Units Per Year?
A)