Question

Dilts Company has a unit selling price of $630, variable costs per unit of $380, and fixed costs of $335,000. Compute the break-even point in units using (a) the mathematical equation and (b) unit contribution margin.

Answer 1

Q= TFC/(SP-VC)

Break Even Point in Units = 1116.67 ≅1117

Step-by-step explanation:

Dilts Company

Sales price $630,

Variable costs per unit $380,

Contribution Margin 300

Fixed costs $335,000

The Mathematical Equation

Q= No of units

Total Revenue= TR

Total Cost = TC

Total Fixed Costs= TFC

Variable Costs= VC

Sales Price = SP

Total Revenue= TR= Price Per unit * No Of units = SP * Q

Total Cost = TC = Total Fixed Costs + Variable Costs ( Number of Units)=

TC= TFC + VC*Q

Now according to break even the total revenue must equal the the total costs

TR= TC

SP*Q= TFC + VC*Q

On re arranging the above equation

SP*Q- VC*Q= TFC

Q(SP-VC)= TFC

Q= TFC/(SP-VC)

Number of Units=Total Fixed Costs/Sales Price- Variable Costs

b) Break Even Point in units = Fixed Costs/ Contribution Margin per unit

Break Even Point in units = Fixed Costs/ (Sales- Variable cost)

Break Even Point in Units = $335,000/ 300= 1116.67 ≅1117