Question

The following totals are used to create a CVP Income Statement for Frederick Company for FY2018:

Frederick Company
Selected Financial Figures
For the Year Ended 12/31/18
Sales (100 units)		$10,000
Variable Costs:
Direct Labor	$1,950
Direct Materials	1,450
Factory Overhead (variable)	2,000
Selling Expenses (variable)	600
Administrative Expenses (variable)	500
Fixed Costs:
Factory Overhead (fixed)	$950
Selling Expenses (fixed)	1,000
Administrative Expenses (fixed)	1,000

Frederick Company utilizes a JIT production system and there are no Raw Materials, Work-in-Process or Finished Goods inventories. Use this information to determine the FY 2016 breakeven point in units. Round and enter as a whole number.

Answer 1

Break Even Sales Unit = Total Fixed Cost / Contribution per unit

Breakven Unit sales : 85 units (84.29 =(2,950/35))

Let us workout contribution per unit based on CVP income statement which works out to $35 per unit :

			Per unit
Sales (100 units)		10,000.00	100.00
Variable Costs:
Direct Labor	1,950.00		19.50
Direct Materials	1,450.00		14.50
Factory Overhead (variable)	2,000.00		20.00
Selling Expenses (variable)	600.00		6.00
Administrative Expenses (variable)	500.00		5.00
Totla Variable Cost		6,500.00	65.00
Contribution		3,500.00	35.00
Fixed Costs:
Factory Overhead (fixed)	950.00
Selling Expenses (fixed)	1,000.00
Administrative Expenses (fixed)	1,000.00
Total Fixed Cost		2,950.00
Net Operating Income		550.00