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

10)

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

Selling price $188
Variable manufacuting costs 97
Variable selling and administrative costs 30


In 2017, total fixed costs were $632,000.

In 2018, there are only two expected changes. Direct material costs are expected to decrease by $6 per unit, and fixed selling and administrative costs are expected to increase by $20,000. What must unit sales be in order for X Company to break even in 2018?

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Answer #1

Answer : Unit sales be in order for X Company to break even in 2018 = 9,731 uniits

Explanation :

Variable cost per unit in 2018

= Variable manufacuting costs in 2017 + Variable selling and administrative costs in 2017 - Decrease in Direct material costs.

= $97 + $30 - $6 = $121.

Selling price per unit in 2018 = $188 (unchanged)

Contribution margin per unit in 2018 = Selling price per unit - Variable cost per unit

= $188 - $121 = $67

Total fixed costs in 2018 = Total fixed costs in 2017 + Expected increase.

= $632,000 + $20,000 = $652,000,

Break even in unit sales (2018) =  Total fixed costs / Contribution margin per unit

= $652,000 / $67 = 9,731 units

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