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Fundamentals of Financial Manageme...

9th Edition
Eugene F. Brigham + 1 other
ISBN: 9781305635937

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BuyFindarrow_forward

Fundamentals of Financial Manageme...

9th Edition
Eugene F. Brigham + 1 other
ISBN: 9781305635937
Textbook Problem
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BREAK-EVEN ANALYSIS A company's fixed operating costs are $430,000, its variable costs are $2.95 per unit and the product’s sales price is $4.50. What is the company's break-even point; that is, at what unit sales volume will its income equal its costs?

Summary Introduction

To determine: The Company’s break-even point at which the sales volume equal its costs.

Introduction:

Break-even Point:

The break-even point is a point where there can be profit or loss. At this point, the costs incurred are equivalent to the revenue earned.

Explanation

Given information:

The fixed operating costs are$430,000.

The variable costs per unit are $2.95.

The selling price of the product is $4.50.

Calculation of the break-even point:

The formula to calculate the break-even point is:

Break-evenpoint=Fixedcosts(SellingpriceperunitVariablecostsperunit)

Substitute $430,000 for the fixed costs, $2

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