CVP with Activity-Based Costing Busy-Bee Baking Company produces a variety of br
ID: 2415604 • Letter: C
Question
CVP with Activity-Based Costing
Busy-Bee Baking Company produces a variety of breads. The average price of a loaf of bread is $1. Costs are as follows:
Required:
1. Compute the break-even point in units using conventional analysis.
units
2. Compute the break-even point in units using activity-based analysis.
units
3. Suppose that Busy-Bee could reduce the setup cost by $97 per setup and could reduce the number of maintenance hours needed to 1,110. How many units must be sold to break even in this case? Round your answer up to the next higher whole unit (for example, 50.3 units rounds to 51).
units
Cost Driver Unit Variable
Cost Level of Cost
Driver Units sold $0.62 - Setups $291 149 Maintenance hours $18 2,450
Explanation / Answer
Answer : Breakeven Point using Conventional analysis
Sale price per unit = 1.00
Cost of unit = 0.68
----------------------
Contribution = 0.32
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Breakeven point (in Units) = Fixed cost /contribution per unit
= 153406/0.32
= 479394 (units)
Breakeven Point (in $) = 479394*1
= $ 479394
Breakeven Point using ABC analysis
Breakeven point (in Units) = Fixed cost (ABC) /contribution per unit
= 65947/0.32
= 206084 (Units)
Breakeven Point (in $) = 206084*1
= $ 206084
New Breakeven Point using ABC analysis
Rate per unit Qty Cost Ratio Share in Fixed cost Qty used New cost/unit Qty New cost Setups 291 149 43359 49.58 32694.00 112 97 112 10864 Machine Hours 18 2450 44100 50.42 33252.87 1847 18 1110 19980 Total cost 87459 100.00 65947 30844 New Breakeven Point '= 30844/0.32 96387.50 '=96387.50 Units