Break-even Assignment
Often a firm will calculate the break-even point for a price. That is, if we set the price at $X, then how many units will we need to sell to cover costs (that is, our break-even point). Work through the following data and questions to gain a better understanding of this approach.
QUESTIONS
1. Start by completing the above table under the assumption that the product will be sold for $30. (It will be easiest to use Excel to complete the table.) How many units need to be sold to break-even at a product price of $30?
2. Now recalculate the table under the assumption that the product will be sold for $15. How many units need to be sold to break-even at a product price of $15?
3. What do you think you would set first: the sales target or the price? Why?
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No. of Units
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Allocated Fixed Costs
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Variable Cost/Unit
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Total Production
Cost
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Average Unit Cost
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Unit Price
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Total Sales Revenue
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Gross Profit
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500
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$10,000
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$10
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1,000
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$10,000
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$10
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1,500
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$10,000
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$10
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2,000
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$10,000
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$10
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2,500
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$10,000
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$10
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