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The following totals are used to create a CVP Income Statement for Frederick Company for FY2018: Frederick Company Selected Financial Figures For the Year Ended 12/31/18 Sales (100 units) $10,000 Variable Costs: Direct Labor $1,600 Direct Materials 2,000 Factory Overhead (variable) 2,000 Selling Expenses (variable) 600 Administrative Expenses (variable) 500 Fixed Costs: Factory Overhead (fixed) $950 Selling Expenses (fixed) 1,000 Administrative Expenses (fixed) 1,000 Frederick Company utilizes a JIT production system and there are no Raw Materials, Work-in-Process or Finished Goods inventories
The following totals are used to create a CVP Income Statement for Frederick Company for FY2018:
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Frederick Company |
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Selected Financial Figures |
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For the Year Ended 12/31/18 |
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Sales (100 units) |
$10,000 |
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Variable Costs: |
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Direct Labor |
$1,600 |
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Direct Materials |
2,000 |
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Factory Overhead (variable) |
2,000 |
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Selling Expenses (variable) |
600 |
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Administrative Expenses (variable) |
500 |
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Fixed Costs: |
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Factory Overhead (fixed) |
$950 |
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Selling Expenses (fixed) |
1,000 |
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Administrative Expenses (fixed) |
1,000 |
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Frederick Company utilizes a JIT production system and there are no Raw Materials, Work-in-Process or Finished Goods inventories. Use this information to determine the FY 2016 breakeven point in units. Round and enter as a whole number.
Expert Solution
1. Break even point
| Break even point = Fixed Costs / Contribution margin |
Break even point = $2,950 / $33 per unit = 89 Units
Working notes:
Fixed costs
| Particulars | $ |
| Factory Overhead | 950 |
| Selling Expenses | 1,000 |
| Administrative Expenses | 1,000 |
| Total Fixed costs | 2,950 |
Contribution Margin
| Particulars | $ |
| Sales | 10,000 |
| Less: Variable costs | |
| Direct Labor | 1,600 |
| Direct Materials | 2,000 |
| Factory Overheads | 2,000 |
| Selling Expenses | 600 |
| Administrative Expenses | 500 |
| Contribution Margin | 3,300 |
Contribution Margin = $3,300 / 100 Units = $33 per unit
All the best...
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