Question

In: Accounting

Millstone Company produces only one product. Normal capacity is 20,000 units per year, and the unit...

Millstone Company produces only one product. Normal capacity is 20,000 units per year, and the unit sales price is $5. Relevant costs are: Unit Variable Cost Total Fixed Cost Materials $1.00 Direct labor 1.20 Factory Overhead 0.50 $15000 Marketing expenses 0.30 5000 Administrative expenses 6000

Required: Compute the following: (1) The break-even point in units of product

(2) The break-even point in dollars of sales

(3) The number of units of product that must be produced and sold to achieve a profit of $10,000

(4) The sales revenue required to achieve a profit of $10,000

Solutions

Expert Solution

Answer to Q1

Break even units = Fixed Cost/Contribution margin per unit

                         = $15,000+$5,000+$6,000/ $5-$1.0-$1.2

                         = 9286 Units (round off)

answer to Q2

Break even points in $ = Break even units * Selling price

                                  = 9286*$5 ; $46,430

Answer to Question 3

Number of units produced to achieve target profit $10,000 = Fixed cost + Profit/Contribution margin per unit

                                                            = $15,000+$5,000+$6,000+$10,000/ $5-$1.0-$1.2

                                                           = 12,857 Units (Round off)

Answer to Q4

Sales Revenue to Achieve target profit of $10,000 = units calculated in part 3 * selling price

                                                                       = 12,857*$5

                                                                       = $64,285

ekkarill92 answered 1 year ago
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