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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

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