Answer:
a) the break-even point in unit= 50, 000 units
b.) the break-even point in dollars = $50,000
Explanation:
The break even point in units is the minimum units of the product that the company should sell in order for it to make no profit or loss.
At this units of sales, the sales revenue would produce a total contribution exactly equal to the fixed cost.
Break -even point in unit = General fixed cost/price - variable cost
= 14,000 + 6000/(1-0.6)= 50,000 units
Break -even point (sales revenue) =General fixed cost/contribution sales ratio
Contribution sales ratio-= 1-0.6/1× 100= 40%
Break-even sales revenue= 14,000 + 6000/40%=$50,000
a) For Smithson Cutting, the break-even point in unit= 50, 000 units
b) For Smithson Cutting, the break-even point in dollars = $50,000
Profit before decision
Profit = (sales price - variable cost)× units - Fixed cost
= (1-0.5)×30000 - 14,000 = $1000
Profit after = 1- 0.60× 50,000 - 20,000= $0
