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Calculating the break even point

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You are employed as a financial analyst for a single-product manufacturing firm. Your supervisor has made the following cost structure information available to you, all of which pertains to an output level of 1,700,000 units.

Return on operating assets = 16 percent
Operating asset turnover = 6 times
Operating assets = $3.25 million
Degree of operating leverage = 9 times

Your task is to find the break-even point in units of output for the firm.

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Solution Summary

Solution calculates the break even point in the given case.

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Please refer attached file for better clarity of expressions and formulas.

Solution:
Return on operating assets=16.00%
Operating asset turnover =6
Operating assets=3.25 million
Degree of operating leverage=9
Units Sold=1.7 million

Sales = operating asset turnover*operating ...

Solution provided by:
Lokesh Jain, MSc
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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