Break-Even Analysis
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(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)
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The solution has various problems relating to breakeven calculations.
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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?
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 ...
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