# Break even analysis

Dester Manufacturing Company makes a product that it sells for $50 per unit. The company incurs variable manufacturing costs of $20 per unit. Variable selling expenses are $5 per unit, annual fixed manufacturing costs are $187,000, and fixed selling and administrative costs are $113,000 per year.

Determine the break even point in units and dollars using each of the following approaches.

A. Contribution margin per unit

B. Equation Method

C. Contribution margin ratio

D. Confirm your results by preparing a contribution margin income statement for the break even sales volume.

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#### Solution Preview

Dester Manufacturing Company makes a product that it sells for $50 per unit. The company incurs variable manufacturing costs of $20 per unit. Variable selling expenses are $5 per unit, annual fixed manufacturing costs are $187,000, and fixed selling and administrative costs are $113,000 per year.

Determine the break even point in units and dollars using each of the following approaches.

A. Contribution margin per unit

Selling price= $50 per unit

Variable cost= $20 per unit

Therefore contribution margin per unit= $30 =50-20

Fixed Costs:

Fixed manufacturing= $187,000

Fixed selling and administrative cost= $113,000

Total ...

#### Solution Summary

Determine the break even point in units and dollars using contribution margin per unit, equation method, contribution margin ratio.