Answer: 100 lawns
Explanation:
The Break-Even Point is the point where expenses/costs equal revenue.
First calculate the costs starting with the fixed costs which are Depreciation, advertising and insurance
= 2,400 + 400 + 2,400
= $5,200
Then the Variable costs per units which are, Weed and feed materials, Direct labor and Fuel.
= 15 + 31 + 2
= $48
Now calculate the Contribution Margin ratio which is,
= (Sales - Variable Cost ) / Sales
= (100 - 48) / 100
= 52%
With Contribution Margin, Break-Even sales can be calculated as,
Breakeven sales = fixed costs / contribution margin ratio
Breakeven sales = 5,200/52%
Breakeven sales in cash = $10,000
Breakeven sales in lawns = breakeven sales / sales per unit
Breakeven sales in lawns = 10,000/100
Breakeven sales in lawns = 100 lawns
Novak breaks even at servicing 100 lawns.
