Question

Outback Outfitters sells recreational equipment. One of the company's products, a small camp stove, sells for 50 per unit. Variable expenses are 32 per stove, and fixed expenses associated with the stove total 108,000 per month.
(a) Compute the break-even point in number of stoves and in total sales dollars.

Answer 1

The Break-even point in the number of stoves and in total sales dollars is 6000 units and $300,000 respectively.

To calculate the Break-even point we have to first calculate the contribution per unit.

Contribution per unit = Selling price per unit - Variable unit cost

Now, substituting the given values in the above formula we get,

Contribution per unit = $50 - $32

                                = $18

Break-even point(number of units) = Fixed cost/Per unit contribution

Now, substituting the given values in the above formula we get,

Break-even point(number of units) = $108,000/$18 per unit

                                                      = 6000 units

Break-even point (sales in dollars) =Break-even point(units) * Unit selling price

Now, substituting the given values in the above formula we get,

Break-even point (sales in dollars) = 6000 units * $5

                                                     = $300,000

Hence, The break-even point in the number of stoves and in total sales dollars is 6000 units and $300,000 respectively.

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