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Calculating the break even point in the given case.

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Carly sells handicrafts at a country fair. The variable cost to make these is $20 each and she sells them for $50 each. The cost to rent a booth at the fair is $270.

a. How much must each be sold to break even?

b. How could you reduce this break even quantity?

Additionally, draw the break even graph in an Excel document.

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Solution Summary

The solution describes the steps to calculate the break even quantity. It also lists some of the methods by which BEP can be reduced. BEP is also shown with the help of a suitable graph in MS Excel.

Solution Preview

Please refer attached file for graph.

a. How much must each be sold to break even?

Variable Cost per unit=V=$20
Price per unit=P=$50
Fixed Cost=Rent=F=$270

Breakeven Point=F/(P-V)=270/(50-20)=9 units

b. How could you reduce this breakeven quantity?

We can reduce this breakeven quantity by
1. Reducing the fixed cost i.e. ...

Solution provided by:
Lokesh Jain, MSc
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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