Exercise 18-8 All That Blooms provides environmentally friendly lawn services fo

Question

Exercise 18-8 All That Blooms provides environmentally friendly lawn services for homeowners. Its operating costs are as follows. Depreciation $1,400 per month Advertising $200 per month Insurance $2,000 per month Weed and feed materials $12 per lawn Direct labor $10 per lawn Fuel $2 per lawn All That Blooms charges $60 per treatment for the average single-family lawn. Determine the company’s break-even point in (a) number of lawns serviced per month and (b) dollars. (a) Break-even point lawns (b) Break-even point $

Explanation / Answer

charge per lawn 60 less variable cost weed & feed material 12 direct labor 10 fuel 2 24 contribution per lawn 36 fixed cost depriciation 1400 advertising 200 insurance 2000 3600 a) break even point lawns = fixed cost / contribution per lawn               = 3600 / 36               = 100 lawns b) break even point lawns $ = break even point lawns * charge per lawn                   = 100 * 60                   = 6000

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