Question

In: Accounting

MFG Manufacturing sells a product for $40 per unit. The production cost of the product is...

MFG Manufacturing sells a product for $40 per unit. The production cost of the product is $21 per unit: direct materials of $8, direct labor of $7, variable overhead of $4 and fixed overhead of $2. The fixed overhead per unit comes from dividing $500,000 of fixed factory overhead by 250,000 units produced. In addition, MFG pays $3 for shipping each unit sold. Finally, MFG has fixed costs outside the factory (such as office building depreciation and salaries) that total $200,000 per year.

Assuming breakeven in units was correctly computed to be 20,000 units, breakeven in dollars is:

$0

$320,000

$360,000

$380,000

$800,000

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Expert Solution

Answer)

Calculation of break-even dollars

Breakeven dollars = Selling price per unit X number of units sold at breakeven

                                  =$ 40 per unit X 20,000 units  

                                    =$ 800,000

Therefore breakeven in dollars is $ 800,000.

Note: the question clearly specifies to assume that breakeven in units is 20,000 units. Accordingly the same has been used to calculate breakeven in dollars.

                                  

ekkarill92 answered 1 year ago
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