Response to the following problem:
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
|
$0.37
|
|
Direct labor
|
0.63
|
|
Variable factory overhead
|
0.53
|
|
Variable selling expense
|
0.12
|
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?