16. If SPU is $8, VCU is S5, and FC are S5,000, use the equation to solve for br
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16. If SPU is $8, VCU is S5, and FC are S5,000, use the equation to solve for breakeven. 17. The shortcut approach using the CM/unit starts the same way as the income statement approach, but rearranges terms in order to end with a general-use formula expressed in terms of the number of units that need to be sold. What is the formula? 18. When using this formula to find the breakeven point, what do we ALWAYS set operating income equal to? 19. A second shortcut approach using the CM ratio also begins the same way as the income statement approach, but rearranges terms in order to end with a general-use formula expressed in terms of the sales revenue (sales in dollars) that needs to be generated. What is the formula? 20. When using this formula to find the breakeven point, what do we ALWAYS set operating income equal to?Explanation / Answer
16. Breakeven Equation:-
Breakeven point is where there is no profit and no loss.The company breaks even at this point.
Let the number of units sold be 'x'
(Selling Price per unit-Variable Cost per unit) x No. of Units - Fixed Cost = 0
8x - 5x -5000 = 0
3x = 5000
x= 1667
Hence breakven point is 1667 units
17.The contribution margin approach for break even point where formula is arranged in terms of number of units sold is as follows:-
Number of Units needed to be sold(to breakeven)= Fixed Cost / Contribution Margin per unit
18.When using the formula to find break even point, what do we always set operating income to? ZERO
This is so because, at breakeven point there is no profit no loss.
19.The formula for breakeven using Contribution margin approcah expressed in terms of Sales revenue ($) :-
Breakeven Sales (in $) = Fixed Cost / Contribution margin ratio
20.
When using the formula to find break even point, what do we always set operating income to? ZERO
This is so because, at breakeven point there is no profit no loss.
Please let me know if further explanation is required for any of the above answers.
Regards,
Akansha.
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