Question

Carla Vista provides environmentally friendly lawn services for homeowners. Its operating costs are as follows Depreciation $1,400 per month Advertising Insurance Weed and feed materials Direct labor Fuel $350 per month $3,970 per month $14 per lawn $11 per lawn $3 per lawn Carla Vista charges $80 per treatment for the average single-family lawn. Determine the company's break-even point in number of lawns serviced per month.

Answer 1

Answer:

The company needs to provide 208.3 lawns serviced to breakeven or reach no profit and no loss position.

Explanation:

The fixed costs include Depreciation, Advertising and Insurance expenses.

Total fixed cost = $1400 Depreciation + $350 Advertising + $3970 Insurance

Total fixed cost = $5720 per month

Here variable costs are Weed & feed materials, Direct labor and Fuel Costs.

Total Variable cost = $14 Weed & feed materials + $11 Direct labor + $3 Fuel

Total Variable cost = $28 per lawn

The sales price is $80 and,

Contribution per unit is $52 per lawn ($80 S.P - $28 V.C)

Breakeven Point (Units) = Total Fixed Cost / Contribution per unit

Breakeven Point (Units) = $5720 / $28 per lawn = $208.3 lawns

The company needs to provide 208.3 lawns serviced to breakeven or reach no profit and no loss position.