Homework Answers
To calculate break even point we need to calculate first the contribution per unit using the below mentioned formula
Contribution per unit = selling price per unit less variable cost per unit
selling price per unit = 140
Variable cost per unit - (Direct labor + Direct materials + Machine Power ) / no of units =
(5500+3750+650)/100 = 9900/100 =99
Contribution per unit = 140 - 99 = 41
All other cost are considered to fixed as it wont vary with the no of units produced. Machine depreciation is also a fixed cost as it not directly related no of units produced.
Total fixed cost = add all the other cost = 38,000
Unit Break even point =no of units required to cover the fixed cost = Break-even output (units) = Fixed costs ($) / Contribution per unit ($) = 38000 /41 = 927 units
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