Question

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

Selling Price	165
Variable manufacuting costs	89
Variable selling and administrative costs	13

In 2017, total fixed costs were $679,000.

In 2018, there are only two expected changes. Direct material costs are expected to increase by $8 per unit, and fixed selling and administrative costs are expected to increase by $10,000. What must unit sales be in order for X Company to break even in 2018

Answer 1

Selling price per unit = $165

Variable manufacturing costs per unit = $89 + $8 = $97

Variable selling and administrative costs per unit = $13

Total variable costs per unit = $97 + $13 = $110

Contribution margin per unit = Selling price per unit - Total variable costs per unit

= $165 - $110

= $55

Fixed costs = $679,000 + $10,000 = $689,000

The unit sales be in order for X Company to break even in 2018 = Fixed costs / Contribution margin per unit

= $689,000 / $55

= 12,527 units