Question

YUX Corporation sells a single product for $40. Its management estimates the following revenues and costs for the year 2020: Net sales $420,000 Selling expenses—variable $22,000 Direct materials 97,500 Selling expenses—fixed 19,000 Direct labour 62,700 Administrative expenses—variable 9,400 Manufacturing overhead—variable 18,400 Administrative expenses—fixed 9,600 Manufacturing overhead—fixed 11,720

(a) Assuming fixed costs and net sales are spread evenly throughout the year, determine YUX’s monthly break-even point in units and dollars. (Round answers to 0 decimal places, e.g. 5,275.) Monthly break-even in units units Monthly break-even in dollars $

Answer 1

Requirement a:

Monthly break-even point in units	168 units
Monthly break-even in dollars	$6,720

Calculations:

Variable costs
Direct materials	97,500
Direct labor	62,700
Manufacturing overhead—variable	18,400
Administrative expenses—variable	9,400
Selling expenses—variable	22,000
Total	210,000
Fixed costs
Manufacturing overhead—fixed	11,720
Administrative expenses—fixed	9,600
Selling expenses—fixed	19,000
Total	40,320

• Number of units sold per year = Annual sales ÷ Selling price per unit = $420,000 ÷ $40 = 10,500
• Contribution margin per unit = (Net sales - total variable costs) ÷ Number of units sold = ($420,000 - $210,000) ÷ 10,500 units = $20 per unit
• Fixed cost per month = Annual fixed costs ÷ 12 months = $40,320 ÷ 12 = $3,360

i.Monthly break-even point in units = Monthly fixed costs ÷ contribution margin per unit = $3,360 ÷ 20 per unit = 168 units

ii.Monthly break-even in dollars = Monthly break-even point in units x Selling price per unit = 168 units x $40 = $6,720