Break Even Analysis for Shock Electronics
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1. Shock Electronics sells portable heaters for $25 per unit, and the variable cost to produce them is $17. Mr. Amps estimates that the fixed costs are $96,000.
a. Compute the break-even point in units.
b. Fill in the table below (in dollars) to illustrate that the break-even point has been achieved.
- Sales
- Fixed costs
- Total variable costs
- Net profit (loss).
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Solution Summary
The solution explains how to conduct a breakeven analysis using the example of Shock Electronics.
Solution Preview
Breakeven is when the total costs are equal to the total revenues. The procedure for finding the breakeven units is to find the contribution margin per unit first. This contribution margin goes towards meeting the fixed costs. If we know the contribution margin per unit, ...
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