¶ … equation to calculating the breakeven point is straightforward, px = vx + FC + profit p is the price per unit, x relates to the number of units, v is the variable costs and FC is the fixed costs. In the case of a break even calculation the profit will be set at zero. To calculate the break even point in unit sales the equation is x = FC/(p-v).
The answers are presented below in table 1, using these equations.
Table 1; Break Even Point
Revenue per item (p)
Less variable costs (v)
Contribution per unit (p-v)
Fixed costs (FC)
$181,980
Break even point (units)
Break even point (sales)
$363,960
Therefore, the break even point is 674 units or sales of $363,960
Brief Exercise 18-10
If the firm requires a profit of $120,051, and it is known there are fixed costs of $170,500, and variable costs are 57%. Knowing that the fixed costs are met out of the contribution margin of p-v, and that this will then provide the calculation, the level of sales needed can be calculating, by taking the FC+ required profits and calculating the total required, so that FC + required profit makes up 43% of the total. Sales required will be $675,700.
Brief Exercise 18-11
The margin of safety, in dollars, is calculated by deducting the break even point from the sales achieved. For example, sales of $1,223,000 less a break...
In variable costing these are the variable costs, plus the fixed cost which are purely allocated to production. It dos not include other coasts, such as sales and administration. The cost for the Montana company is shown in table 2.
Table 2; Total production costs
Direct materials
$14,288
Direct labor
$25,278
Variable manufacturing overhead
$32,266
Total variable product costs
$71,832
Fixed manufacturing overhead
$10,360
Total
$82,192
Exercise 19-17
In variable costing the costs are allocated on actual production, therefore when assessing the allocation of the fixed cost, it is the costs per unit produced, and not the units sold which are used in the calculation. Sales and admin costs are not a manufacturing cost. so are not included.
Table 3; Total manufacturing costs per unit
Variable costs
Direct materials
$8.03
Direct…
