A manufacturing engineer determined the costs of producing a new product. The cost of the equipment...
A manufacturing engineer determined the costs of producing a new product. The cost of the equipment is $432,000 per year and the equipment salvage value at the end of year 5 is $27,000. He also calculated the variable cost per unit of production to be $24.5 and the overhead cost per year to be $58,500. If the company uses a 5-year planning horizon and the price of the product is $59.75, how many units are needed to break even?
Homework Answers
| Selling price per unit | 59.75 | ||||
| Less:; VC per unit | 24.5 | ||||
| CM per unit | 35.25 | ||||
| Total fixed cost for 5 years | |||||
| Equipment cost | 432000 | ||||
| Total overheads for 5 yrs (58500*5) | 292500 | ||||
| Less: Salvage value | -27000 | ||||
| Total fixed cost for 5 years | 697500 | ||||
| Divide: CM per unit | 35.25 | ||||
| Break even units | 19787.23 | ||||
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