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    maandpa1227's Avatar
    maandpa1227 Posts: 17, Reputation: 1
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    #1

    Aug 25, 2007, 03:01 PM
    Break-Even Units
    I am trying hard to solve these problems. I really want to understand what I am doing with limited ability. Please let me know if I am going in the right direction.

    The company sells shovels for $27.75 each. The variable cost per shovel is $14.25. The company's monthly fixed costs are $2,538. Compute the number of shovels the company must sell to break even.

    14.25 / 2,538 = 178

    Number of shovels company must sell = 178 to break even

    27.75 x 178 = 4940

    At a total sales of = $4940.00

    Thank you.
    CaptainForest's Avatar
    CaptainForest Posts: 3,645, Reputation: 393
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    #2

    Aug 25, 2007, 10:37 PM
    Sales Price 27.75
    Less VC 14.25
    CM = 13.5
    Less FC 2,538
    NI 0

    13.5x – 2,538 = 0
    x = 2,538 / 13.5
    x = 188

    Therefore, to BE the company must sell 188 units per month.

    Sales Value = 188 x 27.75 = 5,217
    maandpa1227's Avatar
    maandpa1227 Posts: 17, Reputation: 1
    New Member
    		  
    #3

    Aug 26, 2007, 09:12 AM
    Quote Originally Posted by CaptainForest
    Sales Price 27.75
    Less VC 14.25
    CM = 13.5
    Less FC 2,538
    NI 0

    13.5x – 2,538 = 0
    x = 2,538 / 13.5
    x = 188

    Therefore, to BE the company must sell 188 units per month.

    Sales Value = 188 x 27.75 = 5,217

    I see what happened. I should have subtracted the VC from the sales price which would have given me the CM = 13.5 and divided the CM from the FC which was the 188 figure. Then multiplied the number of shovels by the 27.75/each.

    Thank you. I will continue to work with this problem until the formula is clear but I do see what I did and what you did which helps to understand the solution.
    CaptainForest's Avatar
    CaptainForest Posts: 3,645, Reputation: 393
    Ultra Member
    		  
    #4

    Aug 26, 2007, 02:06 PM
    You're welcome
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