Question

Please, I need a clear explanation and correct answers. Thank you,

Average price of each product/service sold:

$289

Average cost of each product/service to make/deliver (variable cost):

$176.29

Fixed cost for the year:

$250,000

Use the information provided above to calculate the break-even analysis for your company.

Round answers to the nearest whole number.

1) Percentage of price that is contribution margin: %

2) Number of units sold needed to break-even:

3) Total sales needed to break-even: $

Answer 1

$ 1) Contribution Margin % Average sale price of each product Less: Variable cost each product Contribution Margin of each product 289.00 (176.29) 112.71 Contribution Margin % Contribution margin / Average sale price 112.71 / 289.00 39% Contribution Margin % 39% 2) Break even units to be sold Fixed Cost Contribution margin per unit Break even sales $ 250,000 $ 112.71 Fixed Cost/ Contribution Margin per unit 250,000 / 112.71 2,218 Units Break even units to be sold 2,218 Note: Rounded to nearest whole number. 3) Total Sales Needed to Be Break Even Break even sales in Dollars Break even units sold x Sales price 2218 x $ 289 $ 641,002 Break even sales in Dollars $ 641,002