Busy-Bee Baking Company produces a variety of breads. The average price of a loaf of bread is $1. Costs are as follows:
Cost Driver Unit Variable Cost Level of Cost Driver
Units sold ......................... $0.65 .................................. -
Setups ............................. $ 300 ................................. 150
Maintenance hours ................. $15 .............................. 2,500
Other data:
Total fixed costs (traditional) ............... $140,000
Total fixed costs (ABC) ........................ 57,500
Required:
1. Compute the break-even point in units using conventional analysis.
2. Compute the break-even point in units using activity-based analysis.
3. Suppose that Busy-Bee could reduce the setup cost by $100 per setup and could reduce the number of maintenance hours needed to 1,000. How many units must be sold to break even in this case? (Round answer up to whole units.)