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    Calculating break even point

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    Break-Even Point and Target Income

    Detienne Company manufactures and sells one product for $20 per unit. The unit contribution margin is 40% of the sales price, and fixed costs total $80,000.

    1. Using the equation approach, compute:
    A) The break-even point in sales dollars and units.
    B) The sales volume (in units) needed to generate a profit of $40,000.
    C) The break-even point (in units) if variable costs increase to 80% of the sales price and
    fixed costs increase to $100,000.

    2. See if you can recompute the solutions to 1(a), 1(b), and 1(c) in one equation step using either the contribution margin ratio or the contribution margin dollars per unit.

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    https://brainmass.com/business/finance/383810

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    Please refer attached file for better clarity of formulas in Excel.

    1. Using the equation approach, compute:
    A) The break-even point in sales dollars and units.
    Price=P=$20
    Contribution Margin=CM=40%
    Variable Cost per unit=V=P*(1-CM)=$12
    Fixed Costs=F= $80,000
    Let Q be the breakeven quantity.
    Total Revenue=P*Q=20Q
    Total Variable Cost, TVC=V*Q=12Q
    Total Cost=F+TVC=80000+12Q
    At breakeven, TR=TC
    So, 20Q=80000+12Q
    8Q=80000
    Q=80000/8=10000 ...

    Solution Summary

    Solution describes the steps to calculate break even point and sales volume needed to generate a given profit level.

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