Question

Taku-Tau company has provided you with the following information:

Selling price per unit = N$90

Variable cost per unit= N$30

Activity driver	Cost driver rate	Level of activity driver
Set-ups	N$ 800	90
Inspection	N$ 65	500
Other data:
Total fixed costs (traditional)	N$900 000
Total fixed costs (ABC)	N$450 000

If the company reduces the set-up costs by N$100 per set-up and reduces the number of inspections needed to 400, how many units must be sold to break-even?

Select one:

a. 8 938 units

b. 9 338 units

c. 8 983 units

d. None of all

e. 8 839 units

Answer 1

	Selling Price	90.00
	Less: Variable Cost	30.00
	Contribution Margin	60.00
	Traditional Fixed Cost	900,000
	Less: ABC Fixed Cost	450,000
	Common Costs	450,000
	Revised ABC Fixed Costs:
	Activity	Cost Driver Rate	Activity	ABC Costs
	Setup	700	90	63,000
	Inspection	65	400	26,000
	Revised ABC Fixed Costs			89,000
	Common Costs	450,000
	Revised ABC Fixed Costs	89,000
	Total Costs	539,000
	Contribution Margin	60.00
	Break Even Point	8,983
	Answer is 8983 ©