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# Calculating Break Even Point

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1-19 Farris Billiard supply sells all types of billiard's equipment, and is considering manufacturing their own brand of pool cues. Misty Farris, the production manager is currently investing the production of a standard house pool cue that should be very popular. Upon analyzing the cost, Misty determines that the materials and labor costs for each cue is 25 dollars, and the fixed cost that must be covered is 2400 dollars per week. With a selling price of 40 dollars each, how many pool cues must be sold to break even? What would the total revenue be at this break even point?

1-21 Mysti Farris (see Problem 1-19) believes that there is a high probability that 120 pool cues can be sold if the selling price is appropriately set. What selling price would cause the break-even point to be 120?

1-22 Golden Age Retirement Planners specializes in providing financial advice for people planning for a comfortable retirement. The company offers seminars on the important topic of retirement planning. For a typical seminar, the room rental at a hotel is \$1000, and the cost of advertising and other incidentals is about \$10,000 per seminar. The cost of the materials and specials gifts for each attendee is \$60 per person attending the seminar. The company charges \$250 per person to attend the seminar as this seems to be competitive with other companies in the same business. How many people must attend each seminar for Golden Age to break even?

#### Solution Preview

Please refer attached file for better clarity of expressions.

1-19

Fixed Costs=F= \$2,400
Variable Cost per unit=V= \$25
Price per unit=P=\$40
Break even Point=F/(P-V)=150/(50-20)=160.00
160 pools ...

#### Solution Summary

There are 3 problems. Solutions to these problems explain the methodology to calculate break even quantities.

\$2.19

## Calculating break-even points and production cost

Michael Vick has written a self-improvement book that has the following cost characteristics:

Selling Price: \$16.00 per book
Variable cost per unit:
Production \$4.00
Fixed costs:
Production \$88,000 per year
Selling & administrative 18,000 per year

How many units must be sold to break-even?

Assume the variable production cost and the price were both cut by \$2.00 per unit. Which of the following would change?

Contribution margin per unit

Break-even point in units

Total fixed costs

Contribution margin ratio

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