Answer Happy

The Smart Company makes bookcases. Each bookcase requires 20 board feet of lumber plus fittings, which cost $50. The lumber costs $15 per board foot. Direct labour is paid $25 per hour, and it takes four hours to make each bookcase. The facility in which the bookcases are made is rented at $2,000 per month. Depreciation of plant and equipment costs $500 per month. Other production and administrative overhead (all of which is fixed cost) is $5,000 per month. Each bookcase is sold for $1,000. Average monthly sales for last year were 25 bookcases. Required Calculate the following: variable cost per bookcase, contribution margin per bookcase, total fixed cost per month, and monthly break even in units and sales dollars. Explain the benefit in knowing the break-even. ||