16,000 units will have to be sold. The fixed costs that will have to be
covered by the additional sales are:
Fixed costs on the first 16,000 units ... $35,000
Less contribution margin from the first 16,000 units.... 28,000
Remaining unrecovered fixed costs... 7,000
Add monthly rental cost of the additional space
needed to produce more than 16,000 units... 1,000
Total fixed costs to be covered by remaining sales ... $ 8,000
Problem 6-26 (continued)
The additional sales of units required to cover these fixed costs would
be:
Total remaining fixed costs = $8,000 =5,000 units
Unit contribution margin on added units $1.60 per unit
Therefore, a total of 21,000 units (16,000 + 5,000) must be sold in or-
der for the company to break even. This number of units would equal
total sales of:
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