Exercise : Units Sold to Break Even, Unit Variable Cost, Unit Manufacturing Cost, Units to Earn Target Income Werner Company produces and sells disposable foil baking pans to retailers for $2.75 per pan. The variable cost per pan is as follows:
|
Direct materials
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$0.37
|
|
Direct labor
|
0.63
|
|
Variable factory overhead
|
0.53
|
|
Variable selling expense
|
0.12
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Fixed manufacturing cost totals $111,425 per year. Administrative cost (all fixed) totals $48,350.
Required:
1. Compute the number of pans that must be sold for Werner to break even.
2. CONCEPTUAL CONNECTION What is the unit variable cost? What is the unit variable manufacturing cost? Which is used in cost-volume-profit analysis and why?
3. How many pans must be sold for Werner to earn operating income of $13,530?
4. How much sales revenue must Werner have to earn operating income of $13,530?