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Outback Outfitters sells recreational equipment. One of the company's products, a small camp...

Question:

Outback Outfitters sells recreational equipment. One of the company's products, a small camp stove, sells for $150 per unit. Variable expenses are $105 per stove, and fixed expenses associated with the stove total $207,000 per month.

Required:

What is the break-even point in unit sales and in dollar sales?

Break-even Point:

To calculate the break-even point, the annual fixed cost is divided by the contribution margin per unit. The contribution margin per unit is the difference between the selling price and variable cost

Answer and Explanation: 1

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The break-even point in unit sales is 4,600.

The break-even point in dollar sales is $690,000.

The calculation is shown below.

{eq}Contribution \...

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Break-Even Analysis: Definition & Example

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Chapter 4 / Lesson 3
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A break-even analysis utilizes a price calculation formula to determine how much product a business must sell and at what price in order to make a profit. Learn how to apply this analysis through examples with fixed and variable costs, and discover the importance of a margin of safety.


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