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    turtle5a1's Avatar
    turtle5a1 Posts: 18, Reputation: 1
    New Member
    		  
    #1

    Apr 24, 2009, 12:42 AM
    Contribution and BEP(Break Even Point)
    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.
    morgaine300's Avatar
    morgaine300 Posts: 6,561, Reputation: 276
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    #2

    Apr 24, 2009, 01:36 AM

    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?
    turtle5a1's Avatar
    turtle5a1 Posts: 18, Reputation: 1
    New Member
    		  
    #3

    Apr 24, 2009, 03:33 AM
    Quote Originally Posted by morgaine300 View Post
    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?
    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.
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