20231015222459_Cost_Accouting-__Assignmenttt_4-_Break_Even_Questions

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LaSalle College *

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410CG4AS

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Industrial Engineering

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Oct 30, 2023

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Assignment 4 Let us look at 3 examples with BE Example 1: Breakeven Point for a Fashion Retail Store Suppose you run a fashion retail store and want to calculate the breakeven point for a particular product X you sell. Fixed Costs (monthly): $5,000 (rent, utilities, salaries, etc.) Selling Price per Unit: $50 Variable Costs per Unit: $30 (cost of goods, sales commissions, etc.) Requirement: 1: What is the BE in units for your Product X? Fixed cost/ selling price per unit- variable costs per unit BE= $5,000 / ($50 - $30) BE= $5,000 / $20 BE= 250 units 2: What is the BE in revenues in $? BE=BE (In Units) * Selling Price per Unit

BE=250 units * $50 BE =$12,500 3: How would you calculate Part 2 in a quicker way without using a formula? CM= Selling Price per Unit - Variable Costs per Unit CM = $50 - $30 CM = $20 Breakeven = Fixed Costs / Contribution Margin Breakeven = $5,000 / $20 Breakeven= $250 units the breakeven in revenues is $12,500. Example 2: Breakeven Point for a Internet provider Company Imagine you're running Internet services providing company, and you want to calculate the breakeven point in terms of monthly subscribers. Here are some data: Fixed Costs (monthly): $20,000 Monthly Subscription Price: $50 per user Variable Costs per User: $10

Requirement: 1: What is the BE in units for internet providing company? Breakeven = Fixed Costs / (Monthly Subscription Price - Variable Costs per User) Breakeven = $20,000 / ($50 - $10) Breakeven = $20,000 / $40 Breakeven = 500 subscribers 2: What is the BE in revenues in $? Breakeven= Breakeven (in subscribers) * Monthly Subscription Price Breakeven= 500 subscribers * $50 Breakeven= $25,000 Example 3: Breakeven Point for a Manufacturing Company Consider a manufacturing company that produces wallets. Factory rent, machinery maintenance, salaries monthly cost was $30,000 Selling Price per wallet: $20 Variable Costs per raw materials, labor, etc. was $10 Requirement: 1: What is the BE in units in terms of wallet production? Breakeven= Fixed Costs / (Selling Price per Wallet - Variable Costs per Wallet) Breakeven= $30,000 / ($20 - $10) Breakeven= $30,000 / $10

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Breakeven= 3,000 units 2: What is the BE in revenues in $? Breakeven = Breakeven (in units) * Selling Price per Wallet Breakeven = 3,000 units * $20 Breakeven= $60,000