Question

Munoz Manufacturing Company reported the following data regarding a product it manufactures and sells. The sales price is $46.

Variable costs Manufacturing Selling 16 per unit 5 per unit Fixed costs Manufacturing Selling and administrative $164,000 per year $138,500 per year

Required

1. Use the per-unit contribution margin approach to determine the break-even point in units and dollars.

2. Use the per-unit contribution margin approach to determine the level of sales in units and dollars required to obtain a profit of $182,500.

3. Suppose that variable selling costs could be eliminated by employing a salaried sales force. If the company could sell 21,600 units, how much could it pay in salaries for salespeople and still have a profit of $182,500? (Hint: Use the equation method.)

Answer 1

Particulars 46 21 25 ce Variable Costs (16+5 unit a) Break-even point in units Fixed Costs164000+138500 12100 units Contribution p.u. 25 Break-even point in dollars 12100 units x selling price p.u. 12100 x 46 $556,600 b) Desired Profit = $182,500 Desired Contribution Fixed costs Desired profit 164000+138500+182500 $485,000 Required sales in units (Desired Contribution/Contribution p.u.) 485000/25 19400 units Required sales in dollars 19400 x 46 $892,400 Fixed Costs of salaries = Sales-Variable Costs-Fixed Costs-Profit - (21600 x 46) (21600 x [21-5) (164000+138500) 182500 - $163,000 a. Break-even point in units b. Required sales in units c. Fixed Costs of salaries 12100 units 5556,600 19400 units $892,400 $163,000 Break-even point in dollars Required sales in dollars