Question

Break-Even Point

Hilton Enterprises sells a product for $115 per unit. The variable cost is $76 per unit, while fixed costs are $357,435.

Determine (a) the break-even point in sales units and (b) the break-even point if the selling price were increased to $123 per unit.

a. Break-even point in sales units	units
b. Break-even point if the selling price were increased to $123 per unit	units

Target Profit

Trailblazer Company sells a product for $245 per unit. The variable cost is $105 per unit, and fixed costs are $952,000.

Determine (a) the break-even point in sales units and (b) the break-even point in sales units if the company desires a target profit of $352,240.

a. Break-even point in sales units		units
b. Break-even point in sales units if the company desires a target profit of $352,240		units

Answer 1

Solution 1a:

Contribution margin per unit = Selling price - Variable cost = $115 - $76 = $39 per unit

Break even point in sales units = Fixed costs / Contribution margin per unit = $357,435 / $39 = 9165 units

Solution 1b:

Contribution margin per unit = Selling price - Variable cost = $123 - $76 = $47 per unit

Break even point in sales units = Fixed costs / Contribution margin per unit = $357,435 / $47 = 7605 units

Solution 2a:

Contribution margin per unit = Selling price - Variable cost = $245 - $105 = $140 per unit

Break even point in sales units = Fixed costs / Contribution margin per unit = $952,000 / $140 = 6800 units

solution 2b:

Break-even point in sales units if the company desires a target profit of $352,240 = (Fixed costs + Target profit) / CM per unit

= ($952,000 + $352,240) / $140 = 9316 units