sagnik2422
Dec 28, 2014, 12:01 PM
Trenton and Company makes a single product requiring $50 of direct materials. Manufacturing overhead is applied using a predetermined overhead of 150% of direct labor cost. One third of manufacturing overhead is fixed. There is no under or over applied overhead and the company has no beginning or ending inventory. The company reports the following results for August :
Number of Units Sold : 8,000
Selling Price Per Unit : $300
Manufacturing Cost Per Unit : $200
Variable Selling and Admin. Expenses per unit : $45
Total Fixed Selling and Admin Expenses : $290,000
Question : How many units can sales go down before company incurs a loss?
A) 1765 B) 5,100 C) 2,700 D) 6,235 E ) None
My work : Total revenue: $300 * (8,000) = $2,400,000
Price per unit:
Direct materials = 8000/50 = 0.00625
Admin - fixed is 290,000/8000 (units) = 36.25
0.00625 (direct materials)
+ 200.00 (manufacturing)
+ 45.00 (admin - variable)
+ 36.25 (admin - fixed)
= $281.26
Total expenses:
281.26 * 8000 = 2,250,050 <-- this is your break-even point
$2,250,050 / $300 (selling price) = 7500 units <-- this is how many units need to be sold to cover expenses
The answer was 1765 units can someone say where I went wrong
Number of Units Sold : 8,000
Selling Price Per Unit : $300
Manufacturing Cost Per Unit : $200
Variable Selling and Admin. Expenses per unit : $45
Total Fixed Selling and Admin Expenses : $290,000
Question : How many units can sales go down before company incurs a loss?
A) 1765 B) 5,100 C) 2,700 D) 6,235 E ) None
My work : Total revenue: $300 * (8,000) = $2,400,000
Price per unit:
Direct materials = 8000/50 = 0.00625
Admin - fixed is 290,000/8000 (units) = 36.25
0.00625 (direct materials)
+ 200.00 (manufacturing)
+ 45.00 (admin - variable)
+ 36.25 (admin - fixed)
= $281.26
Total expenses:
281.26 * 8000 = 2,250,050 <-- this is your break-even point
$2,250,050 / $300 (selling price) = 7500 units <-- this is how many units need to be sold to cover expenses
The answer was 1765 units can someone say where I went wrong