Questions: RunningUpThatHill, Inc. manufactures running shoes that are all sold at the same price. Suppose the firm is currently selling 1,000 pairs of running shoes per month. The following data pertains to this firm: - Per pair of running shoes: Per month: - Selling price: 119.00 - Manufacturing costs: - Variable Manufacturing costs 51.00 - Fixed Manufacturing costs 21,800 - Non-manufacturing costs: - Variable selling and administrative costs 4.00 - Fixed selling and administrative costs 17,300 The break-even point (BEP) in units (rounded up to the nearest whole unit) is: a. 321 b. 575 c. 611 d. 711 e. N.O.T.A.

RunningUpThatHill, Inc. manufactures running shoes that are all sold at the same price. Suppose the firm is currently selling 1,000 pairs of running shoes per month. The following data pertains to this firm:

- Per pair of running shoes: Per month:
- Selling price: 119.00
- Manufacturing costs:
- Variable Manufacturing costs 51.00
- Fixed Manufacturing costs 21,800
- Non-manufacturing costs:
- Variable selling and administrative costs 4.00
- Fixed selling and administrative costs 17,300

The break-even point (BEP) in units (rounded up to the nearest whole unit) is:
a. 321
b. 575
c. 611
d. 711
e. N.O.T.A.

Transcript text: RunningUpThatHill, Inc. manufactures running shoes that are all sold at the same price. Suppose the firm is currently selling 1,000 pairs of running shoes per month. The following data pertains to this firm: \begin{tabular}{|c|c|c|} \hline & Per pair of running shoes: & Per month: \\ \hline Selling price: & \$119.00 & \\ \hline \multicolumn{3}{|l|}{Manufacturing costs:} \\ \hline Variable Manufacturing costs & \$51.00 & \\ \hline Fixed Manufacturing costs & & \$21,800 \\ \hline \multicolumn{3}{|l|}{Non-manufacturing costs:} \\ \hline Variable selling and administrative costs & \$4.00 & \\ \hline Fixed selling and administrative costs & & \$17,300 \\ \hline \end{tabular} The break-even point (BEP) in units (rounded up to the nearest whole unit) is: a. 321 b. 575 c. 611 d. 711 e. N.O.T.A.

Solution

To determine the break-even point (BEP) in units, we need to calculate the point at which total revenue equals total costs (both fixed and variable). The formula for the break-even point in units is:

\[ \text{BEP (units)} = \frac{\text{Total Fixed Costs}}{\text{Selling Price per Unit} - \text{Variable Cost per Unit}} \]

Step 1: Calculate Total Fixed Costs

Total Fixed Costs = Fixed Manufacturing Costs + Fixed Selling and Administrative Costs

\[ = \$21,800 + \$17,300 = \$39,100 \]

Step 2: Calculate Variable Cost per Unit

Variable Cost per Unit = Variable Manufacturing Costs + Variable Selling and Administrative Costs

\[ = \$51.00 + \$4.00 = \$55.00 \]

Step 3: Calculate Contribution Margin per Unit

Contribution Margin per Unit = Selling Price per Unit - Variable Cost per Unit

\[ = \$119.00 - \$55.00 = \$64.00 \]

Step 4: Calculate Break-Even Point in Units

\[ \text{BEP (units)} = \frac{\$39,100}{\$64.00} \approx 610.9375 \]