Question

E7-27A (similar to) Question Help Kirby Garage Doors manufactures a premium garage door. Currently, the price and cost data associated with the premium garage door are as follows: (Click the icon to view the data.) (Click the icon to view more information.) Read the requirements. Requirement 1. What is the company's current breakeven in units and in dollars? Begin by identifying the formula to compute the breakeven sales in units using the contribution margin approach. = Breakeven sales in units i Data Table Average selling price per premium garage door........ $ Average variable manufacturing cost per door ........... $ Average variable selling cost per door ............. $ Total annual fixed costs... 1,600 700 260 224,000 i More Info Kirby Garage Doors has undertaken several sustainability projects over the past few years. Management is currently evaluating whether to develop a comprehensive software control system for its manufacturing operations that would significantly reduce scrap and waste generated during the manufacturing process. If the company were to implement this software control system in its manufacturing operations, the use of the software control system would result in an increase of $72,000 in its annual fixed costs while the average variable manufacturing cost per door would drop by $160. Print Print Done Done Choose from any drd

Answer 1

Total Fixed cost = existing fixed cost + additional fixed cost

Total fixed cost = $ 224,000 + 72,000 = $ 296,000

Contribution per unit = average selling price - average variable cost

Average selling price = $ 1,600

Average variable cost = average variable manufacturing cost + average variable selling cost

average variable cost = { $ 700 - $ 160) + $ 260 = $ 800

Contribution per unit = $ 1,600 - $ 800 = $ 800

Break even point sales ={ existing fixed cost + additional fixed cost } / contribution per unit

Break even point sales (in units ) =[ $ 224,000 + $ 72,000] / $ 800 = 370 units.