1. Using budget data, how many motors would have to be sold for Waltham Motors Division to break even?
Given data, as per exhibit1for budget, is as under. Total sales (TS) =$864,000 Total Units (TU) = 18,000 Total variable costs (TVC) = $512,800 Total Fixed costs (TFC) = $260,000
Let the number of motors required to be sold to breakeven = Q
Then Q = Total Fixed Costs (TFC) / Contribution Margin per unit (CMU) (Equation 1)
CMU = Selling price per unit (SPU) – Variable cost per unit (VCU) (Equation 2) SPU = TS/TU = 864,000/18,000 = $48 (3) CMU = TVC/TU = 512,800/TU = $ 28.49 (4)
Putting values of (3) and (4) is equation 2, we get CMU = 48 – 28.49 = $ 19.51 (5)
Putting (5) in equation 1, we get, Q = TFC/CMU = 260,000 /19.51 = 13,327 units (6)
So, to breakeven, as per budget data, company must sell 13,327 units.
2. 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?
Given data, as per exhibit1, total expected cost for budget and actual production is calculated as follows simultaneously.
Note: As all manufacturing and shipping overheads (both variable and fixed) were allocated to planned production, we exclude the selling and administrative costs from our calculations.
|No. |Expenditure head |Budget |Actual |Formula |Remarks |
|1 |Total variable manufacturing cost |$484,000 |$ 404,000 |Given |As per Exhibit 1 |