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Becca is setting up a baking business. She has developed recipes for chocolate brownies and chocolate truffles.
The following standard cost information is available:
Chocolate brownies $/unit Chocolate truffles $/unit
Selling price 3.00 4.00
Direct materials:
– Flour 0.40 0.50
– Other – eggs, fats etc 0.20 0.30
Direct labour 0.60 0.80
Variable overhead 0.30 0.45
Fixed overhead 0.90 0.80
____ ____
Profit per unit 0.60 1.15
____ ____
Budgeted production 1,000 units per week 3,000 units per monthThe question: Becca has decided to bake only chocolate brownie to begin with. How many chocolate brownie would becca need to sell per annum to Breakeven.
The answer (0.90 * 52000) + (0.80*36000)= $75600
Contribution for brownies = 3-0.40-0.20-0.60-0.30=1.50$.
BEP = 75600/1.50= $ 50400.
how to get this 52000 i dont understand where he gets that, can you explain please.They budgeted on producing 1,000 units a week. There are 52 weeks in a year, and so they are budgeting on producing 52,000 a year.
(For truffles, the budgeted on producing 3,000 units a month. There are 12 months in a year, so they are budgeting on producing 36,000 a year.)
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