Problem
Sunshine Valley Meat Company produces one of the best sausage products in Pennsylvania. The company's controller compiled the following information by analyzing the accounting records: 1. Meat costs the company $3.25 per pound of sausage produced. 2. Compensation of production employees is $2.25 per pound of sausage produced. 3. Supervisory salaries total $23,000 per month. 4. The company incurs utility costs of $9,000 per month plus $0.35 per pound of sausage produced. 5. Insurance and property taxes average $6,400 per month.
Required:
1. What is your product cost per unit under variable costing if 800 units of sausage products were sold?
2. What is your product cost per unit under absorption costing if 800 units of sausage products were sold?
3. Calculate contribution margin per sausage product and contribution margin ratio.
4. Calculate how many sausage products you need to sell in order to break-even. Calculate how much sales in dollars you need to make in order to break-even.