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# Computing break-even point

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Tanner Company's most recent contribution format income statement is presented below:
Sales \$75,000; Variable expenses \$45,000; contribution margin \$30,000; fixed expenses \$36,000; net operating loss \$(6,000).

The company sells its only product for \$15 per unit. There were no beginning or ending inventories.

Required: a) Compute the company's break-even point in units sold. b) Compute the total variable expenses at the break-even point. c) How many units would have to be sold to earn a target profit of \$9,000? d) The sales manager is convinced that a \$6,000 increase in the advertising budget would increase total sales by \$25,000. Would you advise the increased advertising outlay?

#### Solution Preview

Tanner Company's most recent contribution format income statement is presented below:
Sales \$75,000; Variable expenses \$45,000; contribution margin \$30,000; fixed expenses \$36,000; net operating loss \$(6,000).

The company sells its only product for \$15 per unit. There were no beginning or ending inventories.

Required:
a) Compute ...

#### Solution Summary

The expert computes break-even points.

\$2.49