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In: Accounting

During FY 2019, Dorchester Company plans to sell Widgets for $13 a unit. Current variable costs...

During FY 2019, Dorchester Company plans to sell Widgets for $13 a unit. Current variable costs are $5 a unit and fixed costs are expected to total of $122,000. Use this information to determine the number of units of Widgets for Dorchester to breakeven. (Round to the nearest whole number)

During FY 2019, Dorchester Company plans to sell Widgets for $10 a unit. Current variable costs are $4 a unit and fixed costs are expected to total of $176,000. Use this information to determine the dollar value of sales for Dorchester to breakeven. (Round to the nearest whole dollar)

Baltimore Company uses a job order cost system and applies overhead based on estimated rates. The overhead application rate is based on total estimated overhead costs of $305,000 and direct labor hours of 8,200. During the month of February 2019, actual direct labor hours of 9,900 were incurred. Use this information to determine the amount of factory overhead that was applied in February. (round answer to the nearest whole dollar):

Expert Solution

1) Contribution margin per unit = Selling price per unit - Variable cost per unit

= $13 - $5 = $8 per unit

Break even units of Widgets = Total Fixed Costs/Contribution Margin per unit

= $122,000/$8 per unit = 15,250 units

Therefore the number of units of Widgets for Dorchester to breakeven is 15,250 units.

2) Contribution margin per unit = Selling price per unit - Variable cost per unit

= $10 - $4= $6 per unit

Contribution margin ratio = (Contribution margin per unit/Selling price per unit)*100

= ($6/$10)*100 = 60%

Break even point in dollars = Total Fixed Costs/Contribution Margin ratio

= $176,000/60% = $293,333

Therefore the dollar value of sales for Dorchester to breakeven is $293,333.

3) Overhead application rate = Total Estimated Overheads/Total Direct Labor Hours

= $305,000/8,200 hrs = $37.19512 per DLH

Factory Overhead Applied in Feb 2019 = 9,900 hrs*$37.19512 = $368,232

Therefore the amount of factory overhead that was applied in February is $368,232.

ekkarill92 answered 1 year ago

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