BREAK-EVEN ANALYSIS A company's fixed operating costs are $500,000, its variable costs are $2.30 per unit,...

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BREAK-EVEN ANALYSIS A companys fixed operating costs are $500,000, its variable costs are $2.30 per unit, and the products

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Answer 1

Answer #1

Selling price = $4.80

Less: Variable cost = $2.30

Contribution Margin = $2.50

Fixed Operating cost = $500,000

Contribution margin ratio = Contribution margin per unit/ selling price per unit

= $2.50 / $4.80= 0.520833

= 0.520833

Break-even point in units = Fixed cost / Contribution margin

= $500,000 / $2.50 = 200,000 units

Break-even point in units = 200,000 units

Break-even point in sales dollars = Fixed cost / Contribution margin ratio

$500,000 / 0.520833 = $960,000

So, break-even sales = $960,000

So, at a volume of 200,000 units income equal to its cost

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Answer 2

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