Question

James company sells a product with price $25 per unit. Variable cost is $15 per unit...

James company sells a product with price $25 per unit. Variable cost is $15 per unit and fixed cost is $500,000.

Calculate

• BEP in the unit?

• BEP in pricing?
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Homework Answers

Answer #1

1- BEP in unit:

Break Even Point in unit= Fixed cost/( SP- VC)

Selling price per unit = $25

Variable cost per unit= $15

Total Fixed cost = $500,000

BEP in units= 500,000/(25-15)

= 500,000/10

= 50,000 units

that means when 50,000 units of products are sold the company get break even.[ break even point means sales revenue equals the total cost incurred for manufacturing and selling the product ie, net earnings/loss equal to zero]

2- BEP in pricing:

BEP in units= 50,000units

therefore BEP in price = 50,000* $25

= $12,50,000

ie, the company should generate this much sales to earn zero profit.

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