Answer:
Break Even Point in Dollars = $6,000
Explanation:
Break Even Point in Dollars = [tex]\frac{Total \: Fixed \: Cost}{Contribution \: Per \: Unit}[/tex] [tex]\times[/tex] 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 = [tex]\frac{4,500}{1.5} \times 2 = 6,000[/tex]
Break Even Point in Dollars = $6,000
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)
Step 2. Compute contribution margin ratio
CMR = unit contribution margin / selling price
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
