BREAKEVEN ANALYSIS

Hove Glass Co, a small family run business, manufactures hand blown glass products and has an

established reputation for quality going back several decades. Owing to increased demand for its

most popular products from customers in the Middle and Far East, Hove Glass Co has focused on

manufacturing a single product, a vase available in an array of colours, which has the following cost

and selling price structure:

/unit /unit

Selling price 280

Direct material 64

Direct labour 60

Variable overhead 16

Fixed overhead 28

168

Profit per unit 112

The fixed overhead absorption rate is based on the normal capacity of 2,000 units per month. Assume

that the same amount is spent each month on fixed overheads.

Budgeted sales for next month are 2,200 units