Fantasmas Incorporated had the following information: What is the break-even point in units using ABC?

Question

Fantasmas Incorporated had the following information:  What is the break-even point in units using ABC?

Quizplus · Accepted Answer

To calculate the break-even point using ABC, we need to follow the steps:

1. Identify the cost drivers and their costs per unit:
- Activity 1: Setup cost per batch = $450
- Activity 2: Material handling cost per pound of material = $0.25
- Activity 3: Direct labor cost per hour = $15
- Activity 4: Machine usage cost per hour = $30

2. Calculate the total cost per unit based on the cost driver usage:
Total cost per unit = (Activity 1 cost + Activity 2 cost + Activity 3 cost + Activity 4 cost) / Number of units

Total cost per unit = ($450 + 0.25 * 15 + 15 * 2 + 30 * 1.5) / 30
Total cost per unit = $45

3. Calculate the break-even point:
Break-even point = Fixed costs / (Price per unit - Variable cost per unit)

Given data:
Fixed costs = $450,000
Price per unit = $70
Variable cost per unit = $45

Break-even point = $450,000 / ($70 - $45)
Break-even point = 12,750 units

Therefore, the best choice is C.

Fantasmas Incorporated Had the Following Information: What Is the Break-Even