Units Sold to Break Even, Unit Variable Cost, Unit Manufacturing Cost, 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 $0.37 Direct labor 063 Variable factory overhead 0.53 Variable selling expenses 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?
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
| Direct materials | $0.37 |
| Direct labor | 063 |
| Variable factory |
0.53 |
| Variable selling expenses | 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?
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
