Question

Break-Even Point

Sheridan Enterprises sells a product for $100 per unit. The variable cost is $47 per unit, while fixed costs are $977,532.

Determine (a) the break-even point in sales units and (b) the break-even point if the selling price were increased to $105 per unit.

a. Break-even point in sales units	units
b. Break-even point if the selling price were increased to $105 per unit	units

Answer 1

Break-even point is the level of sales that a company must achieve to reach at no profit no loss situation,

The formula to calculate BEP (in units) = Total Fixed cost/(selling price per unit - variable cost per unit)

Where,

Fixed cost = $977532

Selling price = 100 per unit

Variable cost = 47 per unit

Let's put all the values in the formula to get the BEP in units,

BEP = 977532/ (100 - 47)

BEP = 977532/53

BEP = 18444 Units

So to reach the BEP company must sell 18444 units

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Fixed cost = $977532

Selling price = 105 per unit

Variable cost = 47 per unit

Let's put all the values in the formula to get the BEP in units,

BEP = 977532/ (105 - 47)

BEP = 977532/58

BEP = 16854 Units

So to reach the BEP company must sell 16854 units

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