Read the scenario. Factory X manufactures steam cleaners for engines and has a high level of sales variability. The units sell for $3,200 each but each unit contains about $1,280 in components and direct labor cost. Factory X also keeps the plant open even when sales are low at a cost of approximately $1,000,000 per year.
Answer the questions.
1. List some examples of fixed costs for a typical manufacturing plant.
2. How much are the variable costs in this example?
3. What is the break-even level of units in this example?
4. What is the break-even level of sales in this example?