Question

Find the break even point ?

Rent is $10,000. Salaries to be paid is $50,000. Misc. Fixed costs are $40,000.

Raw Materials are $4 per unit. Packaging is $.10 cents per unit. Direct Labor is $3.40 per unit. Sales price is $10.00 per unit.

If annual capacity was 30,000 units, how much would the sales price need to be to break even?

Answer 1

Ans. Calculation of Contribution per unit : (in $)

Sales perice per unit                      =     10

V/c (4+.10+3.40)                           =      7.50

Contribution per unit                       =     2.50

Total Fixed cost (10000+50000+40000) = $100000

Annual Capacity is 30000 units

Calculation of Sales price need to be to break even

Fixed cost                                =    $100000

V/c for 30000unit @7.5 per unit =    $225000

Total cost for 30000unit             =    $325000

Sales price per unit to be charge to be break even = 325000/30000 = $10.8333

Sale price need to be break even if annual capacity is 30000 units = $10.8333

                            = 90000/2.5 = 36000