Question

# 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?

 Tries 0/3

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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