Chapter 10, Problem 8P

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 units

Selling expenses are expected to be 5% of sales, and net income is to amount to $2.00 per unit.

Required:

1. 1. Calculate the selling price per unit. (Hint: Let “X” equal the selling price and express selling expense as a percentage of “X.”)
2. 2. Prepare an absorption costing income statement for the year ended December 31, 2016.
3. 3. Calculate the break-even point expressed in dollars and in units, assuming that administrative expense and factory overhead are all fixed but other costs are fully variable.