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.

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 ...

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