Homework Answers
Company needs to produce and sell at least that amount of product which covers higher fixed cost.
The break even point is the point where company is able to recover its fixed cost
Formula = Fixed cost / Contribution per unit.
Fixed cost = $338000
Contribution per unit = Total sale price - Total variable cost
= $197 - $143
= $54
Minimum units of production = $338000 / 54 = 6260 units of computer monitor.
Company needs to produce 6260 units of computer monitor to justify the higher cost of option 1 and to earn the profit company needs to produce and sell moire than 6260 units.
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currently produces a 19-inch LCD monitor. The company's accounting
department has reported the following annual costs of producing the
LCD monitor internally:
Marty Monitors
Annual Production Costs for 19-inch LCD Monitor
Per Unit
8,000 Units
Direct Materials
$22.00
$176,000
Direct Labor
$10.00
$80,000
Variable Overhead
$8.00
$64,000
Production Supervisor's Salary
$13.00
$104,000
Depreciation of LCD manufacturing equipment
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Allocated Fixed Overhead
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