Answer:
a. The company’s break-even point in number of lawns serviced per month is 100 lawns
b. The company’s break-even point in dollars is $6,000
Explanation:
a. In order to calculate the the company’s break-even point in number of lawns serviced per month we would have to calculate the following formula:
Breakeven sales units = breakeven sales / sales per unit
Breakeven sales = fixed costs / contribution margin ratio
Total fixed costs = depreciation + advertising + insurance =
Total fixed costs=$1,400 + $200 + $2,000
Total fixed costs=$3,600/month
Total variable cost per unit = weed + direct labor + fuel
Total variable cost per unit = $12 + $10 + 2 =
Total variable cost per unit =$24/lawn
Contribution margin ratio = (sales per unit - variable cost per unit) / sales per unit
Contribution margin ratio = (60 - 24) / 60
Contribution margin ratio = 60%
Breakeven sales =$3,600/60%
Breakeven sales =$6,000
Therefore, Breakeven sales units =$6,000/60
Breakeven sales units =100 lawns
The number of lawns serviced per month is 100 lawns
b. Breakeven sales =$3,600/60%
Breakeven sales =$6,000
The company’s break-even point in dollares is $6,000
