Breakpoint Even
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XYZ Home Health Care Agency is considering adding a new service. The anticipated
charge per service is $150. The variable cost associated with providing this service is
$50. Fixed costs are $2,000. What is the breakeven point for this new service?
I rewrote the question here so I have a guideline.
What we know from the problem stated above is that the revenue is at 150 per service.
Revenue = 150
We know that the variable cost is 50 per service.
Variable cost= 50
Therefore in order to figure out the Breakeven point we must take the contribution cost
margin into effect as well that causes a formula to be formed.
Contribution margin per service formula= Revenue- Variable cost.
This equals to 150-50 which equals to 100 per service.
Therefore the contribution margin= 100
One also knows the fixed costs of the service.
Fixed cost= 2,000.
Therefore in order to figure out the breakeven point we must take the Fixed cost divide
by contribution margin per service.
The numbers will be 2,000 divided by 100 equals 20
The breakeven point= 20 dollars per service.
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