Question

14. If fixed costs increase, the break-even point in units will

a. increase.

b. decrease.

c. remain the same.

d. remain the same; however, contribution per unit will decrease.

23. At the beginning of the year, Wilson Company estimated the following:

Overhead	$360,000
Direct labor hours	60,000 hrs.

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Wilson used normal costing and applies overhead on the basis of direct labor hours. For the month of September, direct labor hours equaled 9,350 and actual overhead equaled $46,750.

Calculate the overhead applied to production in September.

	a.	$56,100
	b.	$30,000
	c.	$46,750
	d.	$5 per direct labor hour
	e.	None of these.

Answer 1

Answer 14.

Breakeven point in unit is the fixed costs divided contribution margin per unit. This shows that breakeven point in unit is direct proportional to fixed costs.

If fixed costs increase, then breakeven point in units will also increase.

Answer 23.

Predetermined Overhead Rate = Estimated Overhead / Estimated direct labor hours
Predetermined Overhead Rate = $360,000 / 60,000
Predetermined Overhead Rate = $6.00

Overhead Applied = Predetermined Overhead Rate * Actual direct labor hours
Overhead Applied = $6.00 * 9,350
Overhead Applied = $56,100