The production of a new product required Zion Manufacturing Co. to lease additional plant facilities. Based on studies, the following data have been made available: Estimated annual sales—24,000 unit Amount Per Unit Estimated costs: Materials .......................................... $ 96,000 $4.00 Direct labor........................................ 14,400 .60 Factory overhead ............................. 24,000 1.00 Administrative expense....................... 28,800 1.20 Total........................................................... $163,200 $6.80 Selling expenses are expected to be 5% of sales, and net income is to amount to $2.00 per unit. Required: 1. Calculate the selling price per unit. (Hint: Let “X” equal the sell- ing price and express selling expense as a percentage of “X.”) 2. Prepare an absorption costing income statement for the year ended December 31, 2016. 3. Calculate the break-even point expressed in dollars and in units, assuming that administrative expense and factory over- head are all fixed but other costs are fully variable.
Break-even analysis
The production of a new product required Zion Manufacturing Co. to lease additional plant facilities. Based on studies, the following data have been made available: Estimated annual sales—24,000 unit
Amount Per Unit
Estimated costs:
Materials .......................................... $ 96,000 $4.00
Direct labor........................................ 14,400 .60
Factory
Administrative expense....................... 28,800 1.20
Total........................................................... $163,200 $6.80
Selling expenses are expected to be 5% of sales, and net income is to amount to $2.00 per unit.
Required:
1. Calculate the selling price per unit. (Hint: Let “X” equal the sell- ing price and express selling expense as a percentage of “X.”)
2. Prepare an absorption costing income statement for the year ended December 31, 2016.
3. Calculate the break-even point expressed in dollars and in units, assuming that administrative expense and factory over- head are all fixed but other costs are fully variable.
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