Question

Evergreen Fertilizer Company produces fertilizer. The company’s fixed monthly cost is $35,000, and its variable costper pound of fertilizer is $0.33. Evergreen sells the fertilizer for $0.50 per pound.
(a) Determine the monthly break-even volume for the company.
(b) Graphically illustrate the break-even volume for the Evergreen Fertilizer Company.

Answer 1

Answer:

BEP units         205,882 pounds

BEP dollars     $102,941.17

Explanation:

$\frac{Fixed\:Cost}{Contribution \:Margin} = Break\: Even\: Point_{units}$

$Sales \: Revenue - Variable \: Cost = Contribution \: Margin$

0.50 - 0.33 = 0.17 contribution per pound

This means each pound generates 0.17 of contribution.

Now, we can calculate the pounds needed to afford the fixed cost.

35,000/0.17 = 205,882.35 pounds

for the BEP we will multiply by the sales price:

205,882.35 pounds x $0.5 = $102,941.17