Question
In: Accounting
4-8 Diego Company manufactures one product that is sold for $78 per unit in two geographic...
4-8
Diego Company manufactures one product that is sold for $78 per unit in two geographic regions—the East and West regions. The following information pertains to the company’s first year of operations in which it produced 49,000 units and sold 44,000 units.
| Variable costs per unit: | ||
| Manufacturing: | ||
| Direct materials | $ | 28 |
| Direct labor | $ | 14 |
| Variable manufacturing overhead | $ | 4 |
| Variable selling and administrative | $ | 6 |
| Fixed costs per year: | ||
| Fixed manufacturing overhead | $ | 686,000 |
| Fixed selling and administrative expense | $ | 510,000 |
The company sold 32,000 units in the East region and 12,000 units in the West region. It determined that $230,000 of its fixed selling and administrative expense is traceable to the West region, $180,000 is traceable to the East region, and the remaining $100,000 is a common fixed expense. The company will continue to incur the total amount of its fixed manufacturing overhead costs as long as it continues to produce any amount of its only product.
What is the company’s break-even point in unit sales?
Solutions
Expert Solution
Computation of break-even sales unit is:
Break-even sales unit = Total value of fixed cost / Value of contribution of each unit
= $1,196,000 / $26
= 46,000 units
Hence, the break-even sales unit is 46,000.
Working notes:
1.
Computation the total value of fixed cost is:
Total value of fixed cost = Value of fixed expense for selling and administrative + Value of fixed overhead
= $510,000 + $686,000
= $1,196,000
Hence, the total value of fixed cost is $1,196,000.
2.
Computation the value of variable cost of each unit is:
Variable cost of each unit = Value of labor + Value of material + Value of variable expense for selling and administrative + Value of variable overhead
= $14 + $28 + $6 + $4
= $52
Hence, the value of variable cost of each unit is $52.
3.
Computation the value of contribution of each unit is:
Value of contribution of each unit = Value of sales of each unit - Value of variable cost of each unit
= $78 - $52
= $26
Hence, the value of contribution margin of each unit is $26.
ekkarill92 answered 1 year agoRelated Solutions
4-2 Diego Company manufactures one product that is sold for $78 per unit in two geographic...
4-2
Diego Company manufactures one product that is sold for $78 per
unit in two geographic regions—the East and West regions. The
following information pertains to the company’s first year of
operations in which it produced 49,000 units and sold 44,000
units.
Variable costs per unit:
Manufacturing:
Direct materials
$
28
Direct labor
$
14
Variable manufacturing overhead
$
4
Variable selling and administrative
$
6
Fixed costs per year:
Fixed manufacturing overhead
$
686,000
Fixed selling and administrative expense...
4-6 Diego Company manufactures one product that is sold for $78 per unit in two geographic...
4-6
Diego Company manufactures one product that is sold for $78 per
unit in two geographic regions—the East and West regions. The
following information pertains to the company’s first year of
operations in which it produced 49,000 units and sold 44,000
units.
Variable costs per unit:
Manufacturing:
Direct materials
$
28
Direct labor
$
14
Variable manufacturing overhead
$
4
Variable selling and administrative
$
6
Fixed costs per year:
Fixed manufacturing overhead
$
686,000
Fixed selling and administrative expense...
Diego Company manufactures one product that is sold for $78 per unit in two geographic regions—the...
Diego Company manufactures one product that is sold for $78 per
unit in two geographic regions—the East and West regions. The
following information pertains to the company’s first year of
operations in which it produced 49,000 units and sold 44,000
units.
Variable costs per unit:
Manufacturing:
Direct materials
$
28
Direct labor
$
14
Variable manufacturing
overhead
$
4
Variable selling and
administrative
$
6
Fixed costs per year:
Fixed manufacturing
overhead
$
686,000
Fixed selling and administrative
expense
$...
Diego Company manufactures one product that is sold for $78 per unit in two geographic regions—the...
Diego Company manufactures one product that is sold for $78 per
unit in two geographic regions—the East and West regions. The
following information pertains to the company’s first year of
operations in which it produced 60,000 units and sold 57,000
units.
Variable costs per unit:
Manufacturing:
Direct materials
$
28
Direct labor
$
12
Variable manufacturing
overhead
$
2
Variable selling and
administrative
$
3
Fixed costs per year:
Fixed manufacturing
overhead
$
1,260,000
Fixed selling and administrative
expense
$...
Diego Company manufactures one product that is sold for $78 per unit in two geographic regions—the...
Diego Company manufactures one product that is sold for $78 per
unit in two geographic regions—the East and West regions. The
following information pertains to the company’s first year of
operations in which it produced 60,000 units and sold 57,000
units.
Variable costs per unit:
Manufacturing:
Direct materials
$
28
Direct labor
$
12
Variable manufacturing
overhead
$
2
Variable selling and
administrative
$
3
Fixed costs per year:
Fixed manufacturing
overhead
$
1,260,000
Fixed selling and administrative
expense
$...
Diego Company manufactures one product that is sold for $78 per unit in two geographic regions—the...
Diego Company manufactures one product that is sold for $78 per
unit in two geographic regions—the East and West regions. The
following information pertains to the company’s first year of
operations in which it produced 49,000 units and sold 44,000
units.
Variable costs per unit: Manufacturing:
Direct materials $ 28
Direct labor $ 14
Variable manufacturing overhead $ 4
Variable selling and administrative $ 6
Fixed costs per year: Fixed manufacturing overhead $ 686,000
Fixed selling and administrative expenses $...
Diego Company manufactures one product that is sold for $78 per unit in two geographic regions—the...
Diego Company manufactures one product that is sold
for $78 per unit in two geographic regions—the East and West
regions. The following information pertains to the company’s first
year of operations in which it produced 49,000 units and sold
44,000 units.
Variable costs per unit:
Manufacturing:
Direct materials$28
Direct labor$14
Variable manufacturing overhead$4
Variable selling and administrative$6
Fixed costs per year:
Fixed manufacturing overhead$686,000
Fixed selling and administrative expenses$510,000
The company sold 32,000 units in the East region and
12,000...
Diego Company manufactures one product that is sold for $78 per unit in two geographic regions—the...
Diego Company manufactures one product that is sold for $78 per
unit in two geographic regions—the East and West regions. The
following information pertains to the company’s first year of
operations in which it produced 60,000 units and sold 57,000 units.
Variable costs per unit: Manufacturing: Direct materials $ 28
Direct labor $ 12 Variable manufacturing overhead $ 2 Variable
selling and administrative $ 3 Fixed costs per year: Fixed
manufacturing overhead $ 1,260,000 Fixed selling and administrative
expenses $...
Diego Company manufactures one product that is sold for $79 per unit in two geographic regions—the...
Diego Company manufactures one product that is sold for $79 per
unit in two geographic regions—the East and West regions. The
following information pertains to the company’s first year of
operations in which it produced 50,000 units and sold 45,000 units.
Variable costs per unit: Manufacturing: Direct materials $ 29
Direct labor $ 16 Variable manufacturing overhead $ 2 Variable
selling and administrative $ 4 Fixed costs per year: Fixed
manufacturing overhead $ 800,000 Fixed selling and administrative
expense $...
Diego Company manufactures one product that is sold for $79 per unit in two geographic regions—the...
Diego Company manufactures one product that is sold for $79 per
unit in two geographic regions—the East and West regions. The
following information pertains to the company’s first year of
operations in which it produced 50,000 units and sold 45,000
units.
Variable costs per unit:
Manufacturing:
Direct materials
$
29
Direct labor
$
16
Variable manufacturing overhead
$
2
Variable selling and administrative
$
4
Fixed costs per year:
Fixed manufacturing overhead
$
800,000
Fixed selling and administrative expense
$...
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