Gilbert Incorporated Had the Following Information ACalculate the Break-Even Point in Units Using the Traditional Approach

Gilbert Incorporated had the following information:
$\begin{array}{lcr}\text { Activity Driver }&\text { Unit Variable cost }&\text { Level of Activity Driver }\\\hline \text { Units sold } & \$ 20 & - \\\text { Setups } & 1,000 & 40 \\\text { Engineering hours } & 60 & 1,000\\\\\text { Other data: }\\\text { Total fixed costs (traditional) } & \$ 100,000 \\\text { Total fixed costs (ABC) } & \$ 50,000 \\\text { Unit selling price } & \$ 40\end{array}$
a.Calculate the break-even point in units using the traditional approach to CVP analysis.
b.Calculate the break-even point in units using the activity-based costing approach to CVP analysis.
c.Calculate the number of units that must be sold to earn a before-tax profit of $40,000.
d.Suppose Gilbert could reduce setup costs by $300 per setup and could reduce the number of engineering hours needed to 900.How many units must be sold to break even in this case?

Correct Answer:

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a.$100,000/($40 - $20)= 5,000 units
b.[...

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