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# Ronnie Cat Inc: Compute break-even point in units and dollar

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Ronnie Cat Inc., produces and sells electric lawn mowers for \$270 each. The variable costs of each mower total \$165 while total monthly fixed costs are \$19,950. Current monthly sales are \$101,250. The company is considering a proposal that will increase the selling price by 5.55%, increase total fixed costs by 50% and increase unit sales to x units per month.

Required.
1.) Compute the company's current break-even point in units and dollars.
2.) Compute the company's break-even point in units and dollars under the proposal.
3.) Would you recommend the company accept the proposal.

#### Solution Preview

Question 1:
Break Even point in units (monthly) = Monthly Fixed cost / (Selling Price - Variable Cost)
=19950/(270-165) = 190 Units
Break even point in dollars = 190 units * 270=\$51,300

Question 2:
New selling Price = 270*(1+5.55%)=284.99
New ...

#### Solution Summary

Explains how to do CVP analysis by providing step-by-step solution to the problem.

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