Units Sold to Break Even, Unit Variable Cost, Unit Manufacturing Cost,Units to Earn Target IncomeWerner Company produces and sells disposable foil baking pans toretailers for $2.75 per pan. The variable cost per pan is as follows: Direct materialsDirect laborVariable factory overheadVariable selling expense $0.370.630.530.12 Fixed manufacturing cost totals $111,425 per year. Administrative cost(all fixed) totals $48,350. Required: 1. Compute the number of pans that must be sold for Werner tobreak even.2. CONCEPTUAL CONNECTION What is the unit variable cost?What is the unit variable manufacturing cost? Which is used in cost-volume-profit analysis and why?3. How many pans must be sold for Werner to earn operatingincome of $13,530?4. How much sales revenue must Werner have to earn operatingincome of $13,530?
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Units Sold to Break Even, Unit Variable Cost, Unit
Units to Earn Target Income
Werner Company produces and sells disposable foil baking pans to
retailers for $2.75 per pan. The variable cost per pan is as follows:
| Direct materials Direct labor Variable factory overhead Variable selling expense |
$0.37 0.63 0.53 0.12 |
Fixed manufacturing cost totals $111,425 per year. Administrative cost
(all fixed) totals $48,350.
Required:
1. Compute the number of pans that must be sold for Werner to
break even.
2. CONCEPTUAL CONNECTION What is the unit variable cost?
What is the unit variable manufacturing cost? Which is used in cost-volume-profit analysis and why?
3. How many pans must be sold for Werner to earn operating
income of $13,530?
4. How much sales revenue must Werner have to earn operating
income of $13,530?
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