Question

In 2017, X Company had the following selling price and per-unit variable cost information:

Selling price $173

Variable manufacuting costs 81

Variable selling and administrative costs 24

In 2017, total fixed costs were $743,000.

In 2018, there are only two expected changes. Direct material costs are expected to decrease by $5 per unit, and fixed selling and administrative costs are expected to decrease by $15,000. What must unit sales be in order for X Company to break even in 2018?

Answer 1

For the 2018 contribution margin and contribution margin ratio will be as under

	Per unit	Per unit	Percentage
Selling price		173	100%
Less: Variable cost
Variable manufacturing costs(81-5)	76
Variable selling and administrative costs	24
Total Variable cost		100	57.80%
Contribution margin		73	42.20%

calculation for the unit sales be in order for X Company to break even in 2018

= Fixed cost / contribution margin per unit

= (743000-15000) /73

=9972.60

=9972.60 units

the unit sales be in order for X Company to break even in 2018 =9972.60 units OR 9973 units