# Break-Even Analysis

(See attached file for full problem description)

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The Hartnett Corporation manufactures baseball bats with Sammy Sosa's autograph stamped on them. Each bat sells for $13 and has a variable cost of $8. There is $20,000 in fixed costs involved in the production process.

a. Compute the break-even point in units.

Selling price per item= $ 13

Variable cost per bat= $ 8

Contribution margin= 5

Fixed cost............= 20,000

Breakeven Units=20,000/5= 4,000

b. Find the sales (in units) needed to earn a profit of $15,000

(how do you find the sales in units to earn profits of 15,000?)

Do you increase the selling price or decrease the VC?

The problem below is a sample problem, can you please walk me through this step by step?

Therapeutic Systems sells its products for $8 per unit. It has the following costs:

Rent $120,000

Factory labor $1.50 per unit

Executive salaries $112,000

Raw material $.70 per unit

Separate the expenses between fixed and variable costs per unit. Using this information

and the sales price per unit of $6, compute the break-even point.

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(See attached file for full problem description)

#### Solution Preview

The Hartnett Corporation manufactures baseball bats with Sammy Sosa's autograph

stamped on them. Each bat sells for $13 and has a variable cost of $8.

There is $20,000 in fixed costs involved in the production process.

a. Compute the break-even point in units.

Selling price per item= $ 13

Variable cost per bat= $ 8

Contribution margin= 5

Fixed cost............= 20,000

Breakeven Units=20,000/5= 4,000

b. Find the sales (in units) needed to earn a profit of $15,000

(how do you find the sales in units to earn profits of 15,000?)

Do you increase the selling price or decrease the VC?

If we need to earn a profit, this figure is simply added to the fixed costs and the new number of units found out ( we do not change the selling price or the variable costs since these are given and cannot be ...

#### Solution Summary

The solution has various problems relating to breakeven calculations.