AACE International CCP Exam - Topic 4 Question 20 Discussion

Actual exam question for AACE International's CCP exam

Question #: 20
Topic #: 4

SCENARIO: A can manufacturing company requested you to provide data for their decision making The unit prices of the can varies but an average selling price of $0.55 cents and average cost of S45 cents is estimated.

The monthly fixed costs are:

Rant-$1,500

Wages - $4.000

Miscellaneous fixed expenses - $500

If there is an additional variable cost of $0.02 per unit, the monthly break even units are:

A40,000 units

B48,500 units

C75,000 units

D60,000 units

Show Suggested Answer

Suggested Answer: D

To calculate the break-even point, we need to determine how many units must be sold to cover all fixed and variable costs. The formula to calculate the break-even point in units is:

Break-evenunits=TotalFixedCostsSellingPriceperUnitVariableCostperUnit\text{Break-even units} = \frac{\text{Total Fixed Costs}}{\text{Selling Price per Unit} - \text{Variable Cost per Unit}}Break-evenunits=SellingPriceperUnitVariableCostperUnitTotalFixedCosts

Given:

Selling Price per Unit = $0.55

Variable Cost per Unit = $0.45 + $0.02 = $0.47

Contribution Margin per Unit = $0.55 - $0.47 = $0.08

Total Fixed Costs:

TotalFixedCosts=1500+4000+500=6000\text{Total Fixed Costs} = 1500 + 4000 + 500 = 6000TotalFixedCosts=1500+4000+500=6000

Break-even units:

Break-evenunits=60000.08=75,000units\text{Break-even units} = \frac{6000}{0.08} = 75,000 \text{ units}Break-evenunits=0.086000=75,000units

Therefore, the correct answer is C. 75,000 units.

by Asarudeen at Feb 14, 2025, 03:00 PM

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Rosio

5 months ago

Not sure about those numbers, feels off to me.

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Chu

5 months ago

Agreed, 60,000 units sounds right with those costs.

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Simona

6 months ago

Wait, how do we get to 75,000 units? That seems way too high!

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Lauran

6 months ago

I think the break-even point is definitely around 60,000 units.

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Shaun

6 months ago

The average selling price is $0.55 and cost is $0.45.

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Fernanda

6 months ago

I think I did a question like this where we had to find the break-even units. I remember the fixed costs were $6,000 total, but I can't remember how to apply it here.

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Avery

7 months ago

If I recall correctly, the contribution margin would be $0.55 - $0.45 - $0.02, which gives us $0.08 per unit. That sounds right, but I'm not confident about the final calculation.

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Yuette

7 months ago

I'm a bit unsure about the variable costs. Is the $0.02 added to the $0.45 cost or is it separate? I feel like I practiced a similar question but can't recall the details.

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Desmond

7 months ago

I think I remember that to find the break-even point, we need to calculate the total fixed costs and divide that by the contribution margin per unit.

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Cecil

7 months ago

This is a classic problem, but I want to make sure I don't miss anything. I'll double-check my work to ensure I have the right approach and the correct answer.

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Nicolette

7 months ago

Okay, I think I've got this. The key is to find the contribution margin per unit, which is the selling price minus the variable cost per unit. Then I can use that to calculate the break-even units.

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Camellia

7 months ago

Hmm, I'm a bit unsure about how to approach this. I know we need to find the break-even point, but I'm not sure if I'm missing any steps in the calculation.

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Scarlet

7 months ago

This looks like a straightforward break-even analysis problem. I'll need to calculate the contribution margin per unit and then use that to find the break-even units.

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