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# Calculating Break even Sales

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C-V-P Analysis
The Last Outpost is a tourist stop in a western resort community. Kerry Yost, the owner of the shop, sells hand-woven blankets for an average price of \$30 per blanket. Kerry buys the blankets from weavers at an average cost of \$21. In addition, he has selling expenses of \$3 per blanket. Kerry rents the building for \$300 per month and pays one employee a fixed salary of \$500 per month.

1. Determine the number of blankets Kerry must sell to break even.
2. Determine the number of blankets Kerry must sell to generate a profit of \$1,000 per month.
3. Assume that Kerry can produce and sell his own blankets at a total variable cost of \$16 per blanket, but that he would need to hire one additional employee at a monthly salary of \$600.
a. Determine the number of blankets Kerry must sell to break even.
b. Determine the number of blankets Kerry must sell to generate a profit of \$1,000 per month.

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#### Solution Preview

1. Determine the number of blankets Kerry must sell to break even.

Fixed costs per month = Rent +salary = \$300+\$500=\$800
Selling Price = \$30 per blanket
Variable costs per blanket = cost+ selling expanses per blanket = 21+3 =\$24
Break even Point = (Fixed Costs)/(Price per unit-Variable cost per unit)
= (800)/(30-24) =(800/6)=133.33 or 134
He has to sell 134 blankets per month to break even.

2. Determine the number of ...

#### Solution Summary

Solution describes the steps in finding break even sales and sales required to generate a certain profit for blankets. Calculations are repeated assuming he starts his own manufacturing.

\$2.19