Question

X Company sells one product. The following are the accountant's price and cost estimates for 2020:

Selling price			$16.33
Direct materials			4.87
Direct labor [all variable]			1.85
Variable overhead			3.87
Variable selling and administration			2.70
Fixed overhead			$12,500
Fixed selling and administration			13,000

Unit sales in 2019 were 5,100; unit sales in 2020 are expected to be 5,600.

The accountant is uncertain about her $3.87 variable overhead estimate. What must variable overhead be in 2020 in order for X Company to breakeven (rounded to two decimal places)?

Answer 1

Variable Overhead if X company is in breakeven at 5600 units of sale = $2.36

Computation
Particulars
Selling price (a)	16.33
Expected Units (b)	5,600.00
Expected Sales (c=axb)	91,448.00
Variable Costs Otherthan Variable Over head	52,752.00
(d=(4.87+1.85+2.7)*5600)
Fixed Cost (e= 12,500+13,000)	25,500.00
Required Total Variable Overhead if X company in breakeven (f=c-d-e)	13,196.00
Variable Overhead per unit (f/b)	2.36