Question

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STEIL manufactures a chainsaw that it sells for $55. Direct material costs are $8.45 per unit. Direct labor per unit requires 0.5 hours @ $25 per hour. Variable over head is $4.90 per unit. Fixed annual overhead is $35,000.

What is the margin per unit?

What is the breakeven unit volume?

What is the break even sales volume?

What is the profit or loss for 2,000 units?

Answer 1

Selling Price = 55

Variable cost

Direct material = 8.45

Direct labor = 0.5 per hour @ $25 per hour = 12.5

Variable Overhead = 4.9

Total VC per unit = 25.85

Total FC = 35,000

What is the margin per unit?

Margin per unit = Sales price per unit – VC per unit

Margin per unit = 55 – 25.85 = 29.15

What is the breakeven unit volume?

Break even units = FC/Margin per unit

Break even units = 35,000/29.15 = 1201 units (1200.68 units)

What is the break even sales volume?

Break Even Sales = Fixed Cost / Profit-volume Ratio

Profit-volume Ratio = (Contribution / Price)*100

Profit-volume Ratio = (29.15 / 55)*100 = 53%

Break Even Sales = 35,000 / 53% = 66,037.7

What is the profit or loss for 2,000 units?

At 2,000 units Total Cost = 35,000 + (2000*25.85) = 86,700

At 2,000 units Total Revenue = 2,000 * 55 = 110,000

Profit = TR – TC

Profit = 110,000 – 86,700 = 23,300