Question
Asked Oct 21, 2019

Your company manufactures bikes that sell for $10,000. Unit variable costs are $6,000 and total
monthly fixed costs are $500,000. What is the breakeven point for your company, in units and in sales.

check_circleExpert Solution
Step 1

Compute breakeven units for the company as shown below:

Fixed cost
Breakeven point (In units)
Sale price per unit -Variable cost per unit
$500,000
$10,000-$6,000
= 125 Units
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Fixed cost Breakeven point (In units) Sale price per unit -Variable cost per unit $500,000 $10,000-$6,000 = 125 Units

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Step 2

Compute breakeven point in sales dollar...

Sale price Variable cost
Contributi on margin ratio
Sale price
$10,000-$6,000
$10,000
= 40%
Now, compute breakeven point in sales dollars using contribution margin ratio
Fixed cost
Breakeven point (In dollars)
Contribution margin ratio
$500,000
40%
- $ 1,250,000
help_outline

Image Transcriptionclose

Sale price Variable cost Contributi on margin ratio Sale price $10,000-$6,000 $10,000 = 40% Now, compute breakeven point in sales dollars using contribution margin ratio Fixed cost Breakeven point (In dollars) Contribution margin ratio $500,000 40% - $ 1,250,000

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