Question

Pharoah provides environmentally friendly lawn services for homeowners. Its operating costs are as follows.

Depreciation $1,500 per month
Advertising $450 per month
Insurance $3,330 per month
Weed and feed materials $20 per lawn
Direct labor $13 per lawn
Fuel $3 per lawn
Pharoah charges $80 per treatment for the average single-family lawn.
(a) Determine the company's break-even point in number of lawns serviced per month o per Break-even point lawns
(b) Determine the company's break even point in dollars.

Answer 1

Results are below.

Step-by-step explanation:

Giving the following information:

Advertising $450 per month

Insurance $3,330 per month

Total fixed costs= $3,780

Weed and feed materials $20 per lawn

Direct labor $13 per lawn

Fuel $3 per lawn

Total unitary varaible cost= $36

Selling price per unti= $80

To calculate the break-even point in units, we need to use the following formula:

Break-even point in units= fixed costs/ contribution margin per unit

Break-even point in units= 3,780 / (80 - 36)

Break-even point in units= 86

Now, in dollars:

Break-even point (dollars)= fixed costs/ contribution margin ratio

Break-even point (dollars)= 3,780 / (44 / 80)

Break-even point (dollars)= $6,873