Question

E5.8 (LO 3, 4), AP Service All That Blooms provides environmentally friendly lawn services for homeowners. Its operating costs are as follows. Depreciation $1,400 per month Advertising $200 per month Insurance $2,000 per month Weed and feed materials $12 per lawn Direct labor $10 per lawn Fuel $2 per lawn All That Blooms charges $60 per treatment for the average single-family lawn. Instructions Determine the company's break-even point in (a) number of lawns serviced per month and (b) dollars Instruction a. Compu b. Prepar e. Comp d. Prepa E5.14 (LO

Answer 1

Contribution margin per unit Selling price Less: Variable costs Contribution margin per unit $ $ $ Per unit 60.00 24.00 ($ 12+ $ 10 + $ 2) 36.00 Fixed costs Depreciation Advertising Insurance Total Fixed costs $ $ $ $ 1,400 200 2,000 3,600 (a) Breakeven point in number of lawns = Total Fixed costs / Contribution margin per unit 100 Units ($3,600 / $ 36) (b) Breakeven point in dollars = (Fixed costs / Contribution margin per unit) * Selling price $ 6,000 Units ($3,600 / $36) * $ 60