A Company Is Considering Producing an Item That Can Be

question 5

Multiple Choice

A company is considering producing an item that can be sold for $37.50 per unit.If the fixed costs for setting up production are $225,000 and the variable cost per unit for the item is $35.00 then the break-even volume for this item is

• A)6,000 units
• B)6,429 units
• C)72,500 units
• D)90,000 units

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Definitions:

Direct Labor-Hours

The total hours worked by employees directly involved in the manufacturing process or providing a service.

Production Orders

Instructions or commands to start the manufacture of a certain quantity of a product within a specified timeframe.

Activity Rate

The rate determining the cost allocation in activity-based costing, which distributes overhead expenses to products or services according to particular activities.

Activity-Based Costing

A pricing approach that determines and allocates the expenses of each activity within an organization to all products and services based on their actual usage.