Question

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.

Required:
Determine the company’s break-even point in:

a. number of lawns serviced per month.
b. dollars.

Answer 1

a. The company’s break-even point in number of lawns serviced per month is 100 lawns

b. The company’s break-even point in dollars is $6,000

Step-by-step explanation:

a. In order to calculate the the company’s break-even point in number of lawns serviced per month we would have to calculate the following formula:

Breakeven sales units = breakeven sales / sales per unit

Breakeven sales = fixed costs / contribution margin ratio

Total fixed costs = depreciation + advertising + insurance =

Total fixed costs=$1,400 + $200 + $2,000

Total fixed costs=$3,600/month

Total variable cost per unit = weed + direct labor + fuel

Total variable cost per unit = $12 + $10 + 2 =

Total variable cost per unit =$24/lawn

Contribution margin ratio = (sales per unit - variable cost per unit) / sales per unit

Contribution margin ratio = (60 - 24) / 60

Contribution margin ratio = 60%

Breakeven sales =$3,600/60%

Breakeven sales =$6,000

Therefore, Breakeven sales units =$6,000/60

Breakeven sales units =100 lawns

The number of lawns serviced per month is 100 lawns

b. Breakeven sales =$3,600/60%

Breakeven sales =$6,000

The company’s break-even point in dollares is $6,000