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n September, Smith Company had the following financial statement amounts related to producing 500 units: Direct...

n September, Smith Company had the following financial statement amounts related to producing 500 units: Direct materials $27,000 Depreciation expense 11,000 Sales revenue 95,000 Direct labour 23,000 Rent expense 25,000 How much is the break-even point, rounded to the nearest whole number?

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Answer #1

Total variable cost = Direct Materialsl+Direct Labour

= $27,000+$23,000 = 50,000

Variable cost per unit = Total variable cost/Units = $50,000/500 units = $100 per unit

Sale price per unit = Sales revenue/units = $95,000/500 = $190 per unit

Contribution Margin per unit = Sales revenue - Variable cost

= $190 - $100 = $90 per unit

Total Fixed cost = Depreciation expense+Rent expense

= $11,000+$25,000 = $36,000

Break even point in units = Total fixed cost/Contribution margin per unit

= $36,000/$90 per unit = 400 units

Break Even Point in Dollars = Break Even Units*Sale price per unit

= 400 units*$190 per unit = $76,000

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