Question

Reference: Table 1 Tech Engineering in TN is making a product for the overseas market. The following cost data for the product has been compiled. Item Cost Selling price $167 | Materials and purchased parts | $25/unit Direct Labor | 2 hrs at $20 per hour Fixed Cost $1,400,000 2.1 The breakeven volume for this product is A) 14,433 B) 8,383 C) 20,000 D) None of these 2.2. To reduce the breakeven volume to 15,000 units, what should be the selling price? A) $210.33 B) $190.33 C) $241.35 D) None of these 2.3. A 2000-gallon metal tank to store hazardous materials was bought 15 years ago at cost of $100,000. What will a 5,000-gallon tank cost today if the power-sizing exponent is 0.57 and the construction cost index for such facilities has increased from 180 to 600 over the last 15 years? Choose the closest value. A) $337,175 B) $666,667 C) $561,960 D) None of these.

Answer 1

2.1 (D) non of these

selling price 167

variable cost = material cost per unit + labor cost

= 25+ (20*2)

=65

contribution per unit = 167- 65 = 102

Break even point= fixed cost / contribution/ unit

= 1400000 / 102

= 13725 units.

2.2 (D)

Variable cost per unit = Direct material per unit + Direct labor per unit. = 25 + (2 * 20) = 25 + 40 = $ 65.

break point = fixed cost / contribution

15000= 1400000 / sales - Variable cost

15000= 1400000 / X- 65

15000X - 975000= 1400000

X= 2375000 / 15000

=$ 158.33