Question

In November, Tim’s Toys, Inc., had direct materials costs of $60,000, direct labor costs of $40,000, variable manufacturing overhead costs of $64,000, and fixed costs of $152,000. If Tim’s unit contribution margin is $200, what is the company’s break-even point?

Select one:

a. 820 units

b. 760 units

c. $152,000

d. $164,000

Equivalent units of production are a measure of:

Select one:

a.  Units in ending work in process inventory.

b. The work done during the period expressed in fully completed units.

c. Units in beginning work in process inventory.

d. Units completed and transferred out.

Answer 1

1. Breakeven point is the point at which the company is having no profit or no loss.

Breakeven point in units = Fixed cost /Contribution margin.

Fixed cost = $ 152,000.

Contribution margin = $ 200 per unit.

Breakeven point in units = 152,000/200

Breakeven point in units = 760 units.

So option B is the correct answer.

2. Equivalent unit of prodcution is the expression of an amount of work done by a manufacturer on units of output that are partially completed at the end of period. Usually, fully completed units and partially completed units in a period are expressed in terms of fully completed units.

So option B is the correct answer.

SUMMARY:

1. Breakeven point = 760 units.

Option B is the correct answer.

2. Equivalent units of production means that converting the partially and fully completed units into completed units.

Option B is the correct answer. That is the work done during the period expressed in fully completed units.