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Determining Breakeven Points

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Breakeven analysis Barry Carter is considering opening a music store. He wants to estimate the number of CDs he must sell to break even. The CDs will be sold for $13.98 each, variable operating costs are $10.48 per CD, and annual fixed operating costs are $73,500.

a. Find the operating breakeven point in number of CDs.

b. Calculate the total operating costs at the breakeven volume found in part a.

c. If Barry estimates that at a minimum he can sell 2,000 CDs per month, should he go into the music business?

d. How much EBIT will Barry realize if he sells the minimum 2,000 CDs per month noted in part c?

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This solution assists in determining breakeven points.

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a. Find the operating breakeven point in number of CDs.
BEP = Fixed Cost / (Price - variable cost) = 73500/(13.98-10.48)=21000

b. Calculate the total operating costs at the breakeven ...

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