Break-Even Point in Units
Chillmax Company plans to sell 3,500 pairs of shoes at $60 each in the coming year. Unit variable cost is $21 (includes direct materials, direct labor, variable factory overhead, and variable selling expense). Total fixed cost equals $78,000 (includes fixed factory overhead and fixed selling and administrative expense).
Required:
1. Calculate the break-even pairs of shoes.
Feedback
At the break-even point, operating income equals $0. The break-even point tells managers how many units must be sold to cover all costs. Once more than the break-even units are sold, the company begins to earn a profit. So to get the break-even units using the operating income statement, we set operating income to zero, and then solve for the number of units.
| Break-Even Units | = | Total Fixed Cost |
| (Price ? Variable cost per unit) |
Review the "How to Calculate the Break-Even Point in Units" example in your text.
2. Check your answer by preparing a contribution margin income statement based on the break-even units. Enter all amounts as a positive number.
| blank | Total | blank | blank |
| Sales | $fill in the blank 28df3df7602bfe9_1 | blank | blank |
| Total variable cost | fill in the blank 28df3df7602bfe9_2 | blank | blank |
| Total contribution margin | $fill in the blank 28df3df7602bfe9_3 | blank | blank |
| Total fixed cost | fill in the blank 28df3df7602bfe9_4 | ||
| Operating income | $fill in the blank 28df3df7602bfe9_5 | blank | blank |