Question

Given the following data: Selling price per unit $ 2.00 Variable production cost per unit $ 0.30 Fixed production cost $ 3,000 Sales commission per unit $ 0.20 Fixed selling expenses $ 1,500 The break-even point in dollars is: (Round your intermediate calculations to 2 decimal places.) Garrison 16e Rechecks 2017-08-04

Answer 1

Answer:

Break-even point in dollars is $6,000

Explanation:

To compute break-even point in dollars, the formula would be

Break-even in dollars = Fixed Cost / Contribution Margin Ratio

Step 1. Compute the unit contribution

Contribution margin =  Selling price - (variable production expense + variable selling & administrative expenses)

• CM = 2 - (0.30 + 0.20)
• CM = 2 - 0.50
• CM = 1.50

Step 2. Compute contribution margin ratio

CMR = unit contribution margin / selling price

• CMR = 1.50 / 2
• CMR = 75%

Step 3. Compute break-even in dollars

Break-even in dollars = fixed cost / contribution margin ratio

BES = ($3,000 + $1,500) / 75%

BES = $4,500 / 75%

BES = $6,000

Answer 2

Answer:

Break Even Point in Dollars = $6,000

Explanation:

Break Even Point in Dollars = $\frac{Total \: Fixed \: Cost}{Contribution \: Per \: Unit}$ $\times$ Selling price per unit.

Total Fixed Cost = Fixed Production cost + Fixed Selling Expenses

Fixed Production Cost = $3,000

Fixed Selling Expense = $1,500

Total Fixed cost = $3,000  +$1,500 = $4,500

Contribution per unit = Selling price - Variable Cost per unit

Selling Price Per Unit = $2.00

Variable Cost Per Unit = Variable Production cost + Sales commission

Variable Production cost = $0.30

Sales Commission Cost = $0.20

Variable Cost per unit = $0.30 + $0.20 = $0.50

Contribution per unit = $2.00 - $0.50 = $1.50

Break-even point = $\frac{4,500}{1.5} \times 2 = 6,000$

Break Even Point in Dollars = $6,000