Question

Units Sold to Break Even, Unit Variable Cost, Unit Manufacturing Cost, Units to Earn Target Income

Werner Company produces and sells disposable foil baking pans to retailers for $2.50 per pan. The variable cost per pan is as follows:

Direct materials	$0.30
Direct labor	0.57
Variable factory overhead	0.74
Variable selling expense	0.17

Fixed manufacturing cost totals $136,541 per year. Administrative cost (all fixed) totals $18,619.

Required:

1. Compute the number of pans that must be sold for Werner to break even.
pans

2. Conceptual Connection: What is the unit variable cost? What is the unit variable manufacturing cost? Round your answers to the nearest cent.

Unit variable cost	$
Unit variable manufacturing cost	$

Which is used in cost-volume-profit analysis?

3. How many pans must be sold for Werner to earn operating income of $7,848?
pans

4. How much sales revenue must Werner have to earn operating income of $7,848?
$

Answer 1

1) number of pans sold at break even point

Break even point in unit's = fixed cost/CONTRIBUTION MARGIN PER UNIT

Here fixed expenses = $136541+$18619= $155160

CONTRIBUTION margin per unit = selling price per unit- variable expenses per unit

$2.50 - ($0.3+$0.57+$0.74+$0.17)=$0.72

Therefore

Break even point in unit's = $155160/$0.72

= 215500units

2)unit variable cost and unit variable Manufacturing cost

which is used in cost volume profit analysis

unit variable cost =$1.78

unit variable Manufacturing cost = ($1.78-$0.17)$1.61

Unit variable cost is used in cost volume profit analysis

3) target profit $7848

Unit's sold to attain target profit = target profit+fixed expenses/CONTRIBUTION MARGIN PER UNIT

= $7848+$155160/$0.72

=$163008/$0.72

= 226400units sales

4) sales revenue when target profit is $7848

units sales (above 3)× selling price per unit

226400×$2.50 =$566000

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