In: Finance
17. Using the following information, calculate the Break-Even in terms of dollars and number of units. (15 points)
BELT MANUFACTURER
Cost of leather per belt- $20 Cost of one belt buckle - $25
Cost to drill holes and attach buckle per belt - $5 Management
payroll per month - $10,000 Operating expense per month -
$20,000
Factory rent per month - $20,000
Price charged to retail store for 5 belts - $500
Cost per belt= $20, buckle /belt=$25, drill
holes&buckle/belt=$5
Fixed Expense= $10,000+$20,000+$20,000= $50,000
Avg Variable Exp Per Sale= $20+ $25+$5+$100= $150
CM= Avg $ Per Sale - Avg Variable Exp Per Sale
Answer : Calculation of Breakeven Point (in units)
Breakeven Point = Fixed Cost / (Selling Price - Variable Cost)
Selling Price per belt = 500 / 5 = 100
Variable Cost per Belt = 20 + 25 + 5 = 50
Fixed Cost = 10000 + 20000 + 20000 = 50000
Breakeven Point = Fixed Cost / (Selling Price - Variable Cost)
= 50000 / (100 - 50)
= 1000 belts
Breakeven Point (in dollars ) = Breakven Point in units * Price charged
= 1000 belts * 100
= 100,000