   Chapter 7, Problem 35E ### Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773

#### Solutions

Chapter
Section ### Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773
Textbook Problem
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# Basic Break-Even CalculationsSuppose that Larimer Company sells a product for $24. Unit costs are as follows: Total fixed factory overhead is$26,500 per year, and total fixed selling and administrative expense is $15,260.Required: 1. Calculate the variable cost per unit and the contribution margin per unit. 2. Calculate the contribution margin ratio and the variable cost ratio. 3. Calculate the break-even units. 4. Prepare a contribution margin income statement at the break-even number of units. 1. To determine Compute variable cost per unit and contribution margin per unit. Explanation Break-Even Analysis: Break-even analysis refers to the technique that determines the number of units to be sold to cover the cost. Break-even analysis issued to analyze the point where total cost is equal to total revenue. Use the following formula to compute the variable cost per unit: Variable Cost Per Unit=Direct Material+Direct Labor+Variable Factory Overhaed+Variable Selling and Administrative Expense Substitute$4.98 for direct material, $2.10 for direct labor,$1 for variable factory overhead and$2 for variable selling and administrative expense. Variable Cost Per Unit=$4

2.

To determine

Prepare the contribution margin ratio and the variable cost ratio.

3.

To determine

Compute break-even unit.

4.

To determine

Prepare the contribution margin income statement at \$3,000 break-even units.

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