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:
$\begin{array}{lll}
\text { Total fixed manufacturing overhead } & \$ 184,000 & \
\text { Total other fixed expenses } & \$ 205,000 & \
\text { Total variable manufacturing expenses } & \$ 240,000 & \
\text { Total other variable expenses } & \$ 280,000 & \
\text { Units produced } & 70,000 & \text { units } \
\text { Budgeted production } & 70,000 & \text { units } \
\text { Units sold } & 50,000 & \text { units } \
\text { Selling price } & \$ 40 &
\end{array}$
What are breakeven sales in units using absorption costing if the production units are actually 50,000? (Round any intermediary calculations to the nearest cent and your final answer up to the next whole unit. )
A)13,142 units
B)5,603 units
C)7,907 units
D)8,601 units

Question

Quizplus · Accepted Answer

Under absorption costing, fixed manufacturing overhead is included in the product cost. With production at 50,000 units, the fixed manufacturing overhead per unit is $184,000 / 50,000 = $3.68. The variable cost per unit is ($240,000 + $280,000) / 70,000 = $7.43. Total cost per unit is $3.68 + $7.43 = $11.11. The contribution margin per unit is $40 - $11.11 = $28.89. Breakeven in units = ($184,000 + $205,000) / $28.89 = 13,142 units.

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