Ms.Sophia Jones,the company president,has heard that there are multiple breakeven points for every product.She does not believe this and has asked you to provide the evidence of such a possibility.Some information about the company for 2017 is as follows:
$\begin{array}{lll}
\text { Total fixed manufacturing overhead } & \$ 185,000 & \
\text { Total other fixed expenses } & \$ 202,000 & \
\text { Total variable manufacturing expenses } & \$ 290,000 & \
\text { Total other variable expenses } & \$ 250,000 & \
\text { Units produced } & 70,000 & \text { units } \
\text { Budgeted production } & 70,000 & \text { units } \
\text { Units sold } & 50,000 & \text { units } \
\text { Selling price } & \$ 42 &
\end{array}$
What are breakeven sales in units using variable costing? (Round any intermediary calculations to the nearest cent and your final answer up to the next whole unit. )
A)12,404 units
B)6,383 units
C)11,287 units
D)10,223 units

Question

Quizplus · Accepted Answer

To find the breakeven point in units using variable costing, calculate the contribution margin per unit and then divide the total fixed costs by this contribution margin. The contribution margin per unit is the selling price minus the variable cost per unit. Total variable costs are $290,000 (manufacturing) + $250,000 (other) = $540,000. Variable cost per unit = $540,000 / 70,000 units = $7.71. Contribution margin per unit = $42 - $7.71 = $34.29. Total fixed costs = $185,000 (manufacturing) + $202,000 (other) = $387,000. Breakeven units = $387,000 / $34.29 ≈ 11,287 units.

MsSophia Jones,the Company President,has Heard That There Are Multiple Breakeven