Waltham Motors

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Waltham Motors Division
Q1. Using budget data, how many motors would have to be sold for Waltham Motors Division to break even?

Answer Q1:

Breakeven Fixed costs $260,000.00
= ---------------------------------- = ---------------------- = 13,326 units number of units Unit contribution margin $19.51

UCM (Unit Contribution margin) = USP (Unit Selling Price) † UVC (Unit Variable Costs) = = $48.00 - $28.49 = $19.51

USP = Sales / Units sold = $864,000.00/18,000 = $48.00
UVC = Total variable costs / Units produced = $512,800.00/18,000 =$28.49

Conclusion: The company should produce, based on the budget data, at least 13,326 units in order to cover all its costs.

Q2. Using budget data, what was the total expected cost per unit if all manufacturing and shipping overhead (both variable and fixed) was allocated to planned production? What was the actual per unit cost of production and shipping?

Answer Q2:

Direct Materials $6.00

Direct Labor $16.00

Overhead Variable $13.11 $4.89
Fixed $8.22

Period Costs Variable* $7.82 $1.60

Fixed $6.22

* Shipping costs are to be considered Period Costs, not Overhead Cost because these costs are reported on the income statement as they are incurred. They are not part of manufacturing overhead, nor related to making the product.

Direct Materials $108,000.00
Direct Materials Unit Cost = --------------------------- = -------------------------- = $6.00/unit No. of Unit Produced 18,000

Direct Labor $288,000.00
Direct Labor Unit Cost = --------------------------- = -------------------------- = $16.00/unit No. of Unit Produced 18,000

Variable Overhead $88,000.00
Overhead (variable) Unit Cost = --------------------------- = -------------------------- = $4.89/unit No. of Unit Produced 18,000

Fixed Overhead $148,000.00
Overhead (fixed) Unit...

Waltham Motors
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