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AACE International Exam CCP Topic 4 Question 20 Discussion
Topic #: 4
SCENARIO: A can manufacturing company requested you to provide data for their decision making The unit prices of the can varies but an average selling price of $0.55 cents and average cost of S45 cents is estimated.
The monthly fixed costs are:
Rant-$1,500
Wages - $4.000
Miscellaneous fixed expenses - $500
If there is an additional variable cost of $0.02 per unit, the monthly break even units are:
To calculate the break-even point, we need to determine how many units must be sold to cover all fixed and variable costs. The formula to calculate the break-even point in units is:
Break-evenunits=TotalFixedCostsSellingPriceperUnitVariableCostperUnit\text{Break-even units} = \frac{\text{Total Fixed Costs}}{\text{Selling Price per Unit} - \text{Variable Cost per Unit}}Break-evenunits=SellingPriceperUnitVariableCostperUnitTotalFixedCosts
Given:
Selling Price per Unit = $0.55
Variable Cost per Unit = $0.45 + $0.02 = $0.47
Contribution Margin per Unit = $0.55 - $0.47 = $0.08
Total Fixed Costs:
TotalFixedCosts=1500+4000+500=6000\text{Total Fixed Costs} = 1500 + 4000 + 500 = 6000TotalFixedCosts=1500+4000+500=6000
Break-even units:
Break-evenunits=60000.08=75,000units\text{Break-even units} = \frac{6000}{0.08} = 75,000 \text{ units}Break-evenunits=0.086000=75,000units
Therefore, the correct answer is C. 75,000 units.
Tien
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