Share
Explore BrainMass

Break even point

Rock is sold to contractors who use the product in construction projects. Needs to increase sales by advertising. Spend $100,000 advertising campaign. currently sells 25,000 tons for a total revenue of $5,000,000.
Direct Labor...............$1,500,000
Variable production overhead...........200,000
fixed production overhead.................350,000

Selling and admministrative expenses
Variable...................................50,000
fixed........................................300,000
a. Compute break-even point in units (i.e. tons)
b. Compute the contribution margin ratio
c. will spend $100,000 on advertising and the company expects the advertising to increase sales by $200,000. Should the company increase advertising and Why?

Solution Preview

Compute Break even point
Rock is sold to contractors who use the product in construction projects. Needs to increase sales by advertising. Spend $100,000 advertising campaign. currently sells 25,000 tons for a total revenue of $5,000,000.
Direct Labor...............$1,500,000
Variable production overhead...........200,000 ...

Solution Summary

The expert computes the break even point for a construction project.

$2.19