Chapter 21, Problem 16E

To determine

Introduction:

The problem relates to calculation of breakeven point in units as well as in amount i.e.

breakeven sales value. The break even point is that stage /level of production where total revenues equals total expenses ie a point where a company earns the same amount of revenues as much it incurs the expenses.

Since revenues equal expenses, the net income for the period will be nil.The company neither lose any money during the period, nor gains any money.

We are provided with the contribution margin statement in the question. A contribution margin income statement is an income statement in which all variable expenses are deducted from sales to arrive at a contribution margin, from which all fixed expenses are then deducted to arrive at the net profit or loss (pre-tax income)for the period.

To calculate:

a)Breakeven point in units and

b)Break even points in sales dollars