The Agate Corporation manufactures and sells two types of bookcases, standard and deluxe.Agate expects the following operating results next year for each type of bookcase: Agate expects to have a total of $57, 600 in fixed expenses next year.What is Agate's break-even point next year in sales dollars?

Question

The Agate Corporation manufactures and sells two types of bookcases, standard and deluxe.Agate expects the following operating results next year for each type of bookcase:  Agate expects to have a total of $57, 600 in fixed expenses next year.What is Agate's break-even point next year in sales dollars?

Quizplus · Accepted Answer

To calculate the break-even point, we need to find the total contribution margin (sales - variable expenses) that will cover the total fixed expenses.

For the standard bookcases:

Contribution margin per unit = $120 - $80 = $40 
Break-even point for standard bookcases = $28,800 ÷ $40 = $720 units

For the deluxe bookcases:

Contribution margin per unit = $260 - $180 = $80 
Break-even point for deluxe bookcases = $28,800 ÷ $80 = $360 units

Total break-even point in units = 720 + 360 = 1,080 units

To find the break-even point in sales dollars, we multiply the total break-even point in units by the selling price per unit for each type of bookcase:

Break-even point in sales dollars = (720 standard bookcases x $120) + (360 deluxe bookcases x $260)

Break-even point in sales dollars = $86,400 + $93,600 = $180,000

Adding the fixed expenses of $57,600, we get:

Break-even point in sales dollars = $180,000 + $57,600 = $237,600

Therefore, the closest answer is C) $96,000.

The Agate Corporation Manufactures and Sells Two Types of Bookcases