Answer (C) is correct . The breakeven point is determined by dividing total fixed costs by the unit contribution margin. The total fixed costs are $9,331,200 ($5,598,720 manufacturing overhead + $3,732,480 general and administrative). The contribution margin is $16.00 ($40 sales price – $22 variable production cost – $2.00 commission). Thus, the breakeven point is 583,200 units ($9,331,200 ÷ $16).
Answer (A) is incorrect because Not subtracting the variable costs per unit from sales price results in 388,800 units.
Answer (B) is incorrect because This number of units does not reflect the sales commissions in the total variable costs.
Answer (D) is incorrect because Including taxes in the total variable costs results in 972,000 units, which understates the unit contribution margin.
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The number of units the company must sell in the coming year in order to reach its breakeven point is