Hi,

I have a question about BEP

Formulas given:
Total Contribution = Total Fixed Cost
Total Contribution = Contribution per Unit * Number of Units
Contribution per Unit = Sales per Unit - Variable Cost per Unit

Information I can get from the question:
Fixed Cost = 16 000
Sales per Unit = 100
Variable Cost per Unit = 60

So if I use the above formula given I would not be getting the fixed cost stated in the question of 16 000 instead I will get a fixed cost amt of 40 000. Why is it so? Advice. Thanks.

I don't understand why you think using those formulas would change the fixed costs. Break even is where contribution margin equals fixed. So to be at break even, contribution margin (total) would have to equal 16,000. You don't change the fixed.

I don't see where you're getting the 40,000 from.

Can you elaborate on your thoughts a bit?

Quote:

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Originally Posted by morgaine300

I don't understand why you think using those formulas would change the fixed costs. Break even is where contribution margin equals fixed. So to be at break even, contribution margin (total) would have to equal 16,000. You don't change the fixed.

I don't see where you're getting the 40,000 from.

Can you elaborate on your thoughts a bit?

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Hi, thanks for the information. I understand what you mean. Anyway just for your information, I miss on a point that the factory produce 1,000 units. Thanks anyway.