Question

Francois french manufactures cheese, which he normally sells at €20/kg, on which sales commission of 5% is paid. plant capacity is 7,500 kg/month. income tax is levied at 30%. fixed costs costs per kg. plant depreciation €8,000 direct materials €4 other plant costs 15,000 direct labor 2 corporate salaries 10,000 var. factory o/h 3 advertising 3,000 the number of kilograms to sell to break-even is:

Answer 1

3,600 kilograms

Step-by-step explanation:

Break even = Total fixed cost / Contribution margin per kg.

Total fixed cost = Plant depreciation + Other plant costs + Corporate salaries + Advertising

= €8,000 + €15,000 + €10,000 + €3,000

= €36,000

Sales commission = Selling price * 5%

= €20 * 5%

= €1 per kg

Variable cost per kg = Direct materials + Direct labor + Variable factory overhead + Sales commission

= €4 + €2 + €3 + €1

= €10 per kg

Contribution margin per kg = Selling price - Variable cost per kg

= €20 - €10

= €10 per kg

Break even = Total fixed cost / Contribution margin per kg.

= €36,000 / €10

= 3,600 kilograms