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P10-8 Break-even analysis The production of a new product required Zion Manufacturing Co. to lease additional plant facilities. Based on studies, the following data have been made available: Estimated annual sales24,000 units

Amount Per unit

Estimated costs:

Materials .......................................... $ 96,000 $4.00

Direct labor........................................ 14,400 0.60

Factory overhead ................................. 24,000 1.00

Administrative expense........................... 28,800 1.20

Total............................................. $163,200 $6.80

Selling expenses are expected to be 5% of sales, and net income is to amount to $2.00 per unit.

Required:

1. Calculate the selling price per unit. (Hint: Let X equal the sell- ing price and express selling expense as a percentage of X.)

2. Prepare an absorption costing income statement for the year ended December 31, 2016.

3. Calculate the break-even point expressed in dollars and in units, assuming that administrative expense and factory over- head are all fixed but other costs are fully variable.

Use this format:

Problem 10-8 1. Percent Selling Price Per Unit Amount Materials Direct labor Factory overhead Administraative expense Net income Subtotal Selling expense (5%) Selling price per unit 95% 5% 100%. 2- Venetian Manufacturing Company Income Statement For the Year Ended December 31, 2013 Sales Less Cost of goods sold: Materials Direct labor Factory overhead Gross margin on sales Operating expenses: Selling expense Administrative expense Total operating expenses Net operating income 3. Break-even sales volume a. Total fixed costs b. 1 - (Variable cost per unit - Sales price per unit) a + b d. Selling price per unit Break even sales volume in units (c + d) e

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