CVP WITH ACTIVITY BASED COSTING
Dory Manufacturing Company produces T shirts that are screen printed with the logos of various sports teams. Each shirt is priced at $10. Costs are as follows:
|
Cost Driver |
Unit Variable Cost |
Level of Cost Driver |
|
Units sold |
$ 5 |
— |
|
Setups |
450 |
80 |
|
Engineering hours |
20 |
500 |
|
Other data: |
|
|
|
Total fixed costs (conventional) |
$96,000 |
|
|
Total fixed costs (ABC) |
50,000 |
|
Required:
1. Compute the break even point in units using conventional analysis.
2. Compute the break even point in units using activity based analysis.
3. Suppose that Dory could reduce the setup cost by $150 per setup and could reduce the number of engineering hours needed to 425. How many units must be sold to break even in this case?