Reid Company is considering the production of a new product. The expected variable cost is $24 per unit. Annual fixed costs are expected to be $892,500. The anticipated sales price is $75 each. RequiredDetermine the break-even point in units and dollars using each of the following:Use the equation method.Use the contribution margin per unit approach.Use the contribution margin ratio approach. (Do not round intermediate calculations. Round "Contribution margin ratio" to 1 decimal place. (i.e., 0.234 should be entered as 23.4))

Name: Reid Company is considering the production of a new product. The expec
Uploaded: 2022-05-24T13:26:03.000Z
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Description: Reid Company is considering the production of a new product. The expected variable cost is $24 per unit. Annual fixed costs are expected to be $892,500. The anticipated sales price is $75 each. RequiredDetermine the break-even point in units and doll

Break even point (BEP): Breakeven is the point where total expenses are equal to total revenue. at this point, there is no loss and no profit is possible. Break even point (units) = Fixed costs / Contribution margin per unit1. At Break Even Point, Profit = 0 Let the Unit be X to calculate the Break Even Point. Profit = (Selling price * X) – (Variable cost * X) – Fixed costs0 = ($75 * X) – ($24 * X) - $892,5000 = $51X - $892,500X = $892,500 / $51X = 17,500 units Break-even point in units = 17,500 units Break Even Point in Dollars = Break Even Units * Selling price per unit= 17,500 units x $75= $1,312,5002. Contribution Margin per Unit = Selling Price – Variable Costs= $75 - $54 = $51 per unit Break Even Point in Units = Fixed Costs / Contribution Margin per unit= $892,500 / $45= 17,500 units Break Even Point in Dollars = Break Even Units * Selling price per unit= 17,500 units x $75= $1,312,500 3. Contribution Margin Ratio = (Contribution Margin per unit / Selling price) *100= ($51 / $75)*100 = 68% Break Even Point in Dollars = Fixed Costs / Contribution Margin Ratio= $892,500 / 68%= $1,312,500 Break Even Point in Units = Break Even Point in Dollars / Selling Price per Unit= $1,312,500 / $51 = 17,500 units

Answered: Reid Company is considering the…

FINANCIAL ACCOUNTING

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Chapter1: Financial Statements And Business Decisions

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Reid Company is considering the production of a new product. The expected variable cost is $24 per unit. Annual fixed costs are expected to be $892,500. The anticipated sales price is $75 each.

Required

Determine the break-even point in units and dollars using each of the following:

Use the equation method.
Use the contribution margin per unit approach.
Use the contribution margin ratio approach. (Do not round intermediate calculations. Round "Contribution margin ratio" to 1 decimal place. (i.e., 0.234 should be entered as 23.4))

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