Question

ut References Mailings Review View Help Part 2 Yikes! He'll clearly have to complete more than 10 jobs. W.L. needs to be able to at least cover his costs. Still using the preliminary estimates provided, how many jobs would W.T. have to complete to break even? What would that be in dollars? $ (1) Contribution margin: Sales price per job Less: Variable costs per job =Contribution margin per job jobs (2) Break-even point in units: Fixed costs Contribution margin per job Note: W.T. won't be paid if he only completes part of a job. (3) Break-even point in sales: Break-even point in jobs Sales price per job = Break oven point in dollars Check your work: Total sales Less: Total variable costs = Total contribution margin Less: Total fixed costs = Total profit Question: Why is breakeven profit not exactly 30%

Answer 1

Solution:
PART 1
	Item	Per Job	Total (10 Jobs)	Computations
	Sales	$   15.00	$                   150.00	(15*10)
	Less: Varibale Cost	$     5.75	$                     57.50	{(4+.75+1)*10}
	Contribution Margin	$     9.25	$                     92.50	{(15-9.25)*10}
	Less: Fixed Cost	$   22.00	$                   220.00	(100+220)
	Gross Margin	$ (12.75)	$                 (127.50)	{(9.25-22)*10}
PART 2
1	Contribution Margin:
	Sales Price per Job	$   15.00
	Less: Varibale Cost per Job	$     5.75
	Contribution margin per Job	$     9.25
2	Break even points in units:
	Fixed Costs / Contribution margin per job	=	$220/$9.25	24	Jobs
						23.78378
3	Break even points in sales:
	Break even points in units	*	Sales Price per Job	=	Break even points in dollars
	24	*	$                     15.00	=	$       360
	Check
	Total Sales	$      360
	Less Variable Costs	$      138
	= Total Margin Contribution	$      222
	Less: Fixed Cost	$      220
	=Total Profit	$           2
4	Break even sales is not exactly $0 because the break even point occurs in 23.78 units but production will be of 24 units & therefore there is a profit of $2.