A company incurs a labor cost of P115, material cost of P76, and a variable cost of P2.32 for each item produced. If the selling price per unit is P600 and the fixed monthly overhead amounts to P428,000, how many units must be made monthly to reach the break-even point?

Explanation

To calculate the break-even quantity, first determine the total variable cost per unit by summing labor, material, and variable costs: P115 + P76 + P2.32 = P193.32. Then, find the contribution margin per unit by subtracting the variable cost from the selling price: P600 - P193.32 = P406.68. Finally, divide the fixed overhead by the contribution margin: P428,000 ÷ P406.68 ≈ 1,053 units. Therefore, the manufacturer must produce approximately 1,053 units to break even.