Ingo Company produces and sells disposable foil baking pans to retailers for $3.20 per pan. The variable costs per pan are as follows:
|
Direct materials
|
$0.77
|
|
Direct labor
|
0.71
|
|
Variable overhead
|
0.60
|
|
Selling
|
0.32
|
Fixed manufacturing costs total $151,650 per year. Administrative costs (all fixed) total $28,350.
Required
1. Compute the number of pans that must be sold for Ingo to break even.
2. How many pans must be sold for Ingo to earn a before-tax profit of $12,600?
3. What is the unit variable cost? What is the unit variable manufacturing cost? Which is used in cost-volume-profit analysis, and why?