Answer the following questions using the information below:
Gundagai Company sells several products.Information of average revenue and costs is as follows:
$\begin{array}{lr}
\text { Selling price per unit } & \$ 28.50 \
\text { Variable costs per unit: } & \
\quad \text { Direct material } & \$ 5.25 \
\text { Direct manufacturing labour } & \$ 1.15 \
\text { Manufacturing overhead } & \$ 0.25 \
\quad \text { Selling costs } & \$ 1.85 \
\text { Annual fixed costs } & \$ 110000
\end{array}$
-The number of units that Gundagai must sell each year to break even is:
A)1000 units.
B)4000 units.
C)5500 units.
D)indeterminable.

Question

Answer the following questions using the information below:
Gundagai Company sells several products.Information of average revenue and costs is as follows:
 $\begin{array}{lr}
\text { Selling price per unit } & \$ 28.50 \
\text { Variable costs per unit: } & \
\quad \text { Direct material } & \$ 5.25 \
\text { Direct manufacturing labour } & \$ 1.15 \
\text { Manufacturing overhead } & \$ 0.25 \
\quad \text { Selling costs } & \$ 1.85 \
\text { Annual fixed costs } & \$ 110000
\end{array}$
-The number of units that Gundagai must sell each year to break even is:
A)1000 units.
B)4000 units.
C)5500 units.
D)indeterminable.

Quizplus · Accepted Answer

To calculate the break-even point in units, first determine the contribution margin per unit, which is the selling price per unit minus the variable costs per unit. The variable costs per unit are the sum of direct material, direct manufacturing labor, manufacturing overhead, and selling costs, which total $5.25 + $1.15 + $0.25 + $1.85 = $8.50. The selling price per unit is $28.50, so the contribution margin per unit is $28.50 - $8.50 = $20.00. The break-even point in units is then the annual fixed costs divided by the contribution margin per unit, which is $110,000 / $20.00 = 5500 units.

Answer the Following Questions Using the Information Below: Gundagai Company

Answer the Following Questions Using the Information Below:
Gundagai Company