Accounting. Working out break even.?

Breakeven & CVP Analysis.

‘The Chocolate Eggy Company Ltd’ is a small company that produces boxes of chocolate eggs. Each box sells for $25.00. Variable costs are $15.00 per unit and fixed costs total $35,000 per month.

Required:

a) Calculate the breakeven point in units (boxes) and dollars. Show your workings.

MY WORKING

Break-even sales in units = Fixed costs/Unit contribution margin.

Break-even sales in dollars = Fixed costs/Contribution margin ratio.

Unit contribution margin= (25-15)= 10

Contribution margin ration= (10/25)= 0.4

Therefore

35,000/10= 3,500 units

35,000/0.4= $87,500

Have I done this correct?

Second part is where I get stuck.....

Calculate the sales, in units (boxes) and dollars, necessary to provide a profit before tax of $6,000 a month. Show your workings.

2 Answers

Relevance
  • Chris
    Lv 6
    9 years ago
    Best Answer

    You're right.

    For part 2...you make $10 per box, so to get a $6,000 profit you need to sell $6,000 / 10 = 600 boxes in addition to the 3,500 = 4,100 boxes.

    4,100 boxes x $25 per box = $102,500.

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