Required informationThe Foundational 15 (Algo) [LO6-1, LO6-2, LO6-3, LO6-4, LO6-5]Skip to question [The following information applies to the questions displayed below.] Diego Company manufactures one product that is sold for $78 per unit in two geographic regions—the East and West regions. The following information pertains to the company’s first year of operations in which it produced 60,000 units and sold 57,000 units. Variable costs per unit: Manufacturing: Direct materials$28Direct labor$12Variable manufacturing overhead$2Variable selling and administrative$3Fixed costs per year: Fixed manufacturing overhead$1,260,000Fixed selling and administrative expense$654,000 The company sold 42,000 units in the East region and 15,000 units in the West region. It determined that $340,000 of its fixed selling and administrative expense is traceable to the West region, $290,000 is traceable to the East region, and the remaining $24,000 is a common fixed expense. The company will continue to incur the total amount of its fixed manufacturing overhead costs as long as it continues to produce any amount of its only product. Foundational 6-9 (Algo)9. If the sales volumes in the East and West regions had been reversed, what would be the company’s overall break-even point in unit sales?

Break even point is the production level at which the expense of production is equal to the revenues for the product. In other words, means the production cost would be equal to the revenue of the product. Computing the break even point in unit sales as: Break even point = Fixed costContribution per unit=$1,914,000$33=58,000 units Therefore, the break even point in unit sales is 58,000 units. Working Note: Fixed cost is computed as: Total fixed cost =Fixed manufacturing overhead + Fixed selling and administrative expense=$1,260,000 + $654,000=$1,914,000 Computing contribution per unit as: Contribution per unit = Selling Price - Variable cost per unit=Selling Price -(Direct materials+direct labor+variable production overhead+selling overhead) per unit=$78 - ($28+$12+$2+$3)=$78 - $45=$33

Answered: Diego Company manufactures one product…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Required information

The Foundational 15 (Algo) [LO6-1, LO6-2, LO6-3, LO6-4, LO6-5]

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[The following information applies to the questions displayed below.]

Diego Company manufactures one product that is sold for $78 per unit in two geographic regions—the East and West regions. The following information pertains to the company’s first year of operations in which it produced 60,000 units and sold 57,000 units.


Variable costs per unit:
Manufacturing:
Direct materials	$	28
Direct labor	$	12
Variable manufacturing overhead	$	2
Variable selling and administrative	$	3
Fixed costs per year:
Fixed manufacturing overhead	$	1,260,000
Fixed selling and administrative expense	$	654,000

The company sold 42,000 units in the East region and 15,000 units in the West region. It determined that $340,000 of its fixed selling and administrative expense is traceable to the West region, $290,000 is traceable to the East region, and the remaining $24,000 is a common fixed expense. The company will continue to incur the total amount of its fixed manufacturing overhead costs as long as it continues to produce any amount of its only product.

Foundational 6-9 (Algo)

9. If the sales volumes in the East and West regions had been reversed, what would be the company’s overall break-even point in unit sales?

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