Question

Shock Electronics sells portable heaters for $57 per unit, and the variable cost to produce them is $33. Mr. Amps estimates that the fixed costs are $93,000.

a. Compute the break-even point in units.
  

b. Fill in the following table (in dollars) to illustrate that the break-even point has been achieved.
  

Sales
Fixed costs
Total variable costs
Net profit (loss

Answer 1

answer = a = 3,875 units

detailed view ,

break even point in unit = fixed cost / contribution per unit

contribution per unit = sales price per unit - variable cost per unit

here , sales price per unit = $57

variable cost per unit = $33

thus , contribution per unit = $57 - $33 = $24

here, fixed cost = $93,000

so , break even point in units = $93,000/$24

= 3,875 units

answer = b =

1.sales = total units produced * sales price per unit

= 3,875 * $57 = $2,20,875  

2.fixed cost = $93,000

3.total variable cost = total units produced * variable cost per unit

= 3,875 * $33 = $1,27,875

4.net profit or loss = sales - fixed cost - total variable cost

= $2,20,875 - $93,000 - $1,27,875 = 0 (zero )

that means there is no profit , no loss. It is the break even point where total expenses equalising to total revenue.