break even point — OpenTuition Forums

NNasrin7y ago

hi can i ask you to explain the calculation of break even point in following question : sutton company produce 4 products m a r p c/s ratio 5% 10% 15% 20% max. salse 200$ 120$ 200$ 180$ min.salse 50$ 50$ 20$ 10$ budgeted fixed cost = 60$ the lowest break sales to meet the minimum salse value constraint. thanks

John MoffatTutor7y ago#1

You surely have an answer to this question in the same book in which you found the question. Ask about whatever it is in the answer that you are not clear about and then I will explain.

NNasrin7y ago#2

hi in the answer at first calculate the contributin at lowest sales = 60.000 $ then contribution P due to it has the highest c/s ratio , after that for calculation contribution R = 60000-12500-34000=13500 I can't understand why should reduce 12500 ? thanks

John MoffatTutor7y ago#3

At the minimum sales the contribution is (5% x 50,000) + (10% x 50,000) + (15% x 20,000) + (20% x 10,000) = 12,500. So for breakeven, they need an extra 60,000 - 12,500 = 47,500 contribution. The best to go for first is P. They can have extra sales of 180,000 - 10,000 = 170,000, which will give extra contribution of 20% x 170,000 = 34,000. For breakeven they therefore still need an extra 47,500 - 34,000 = 13,500.

NNasrin7y ago#4

thanks a lot

John MoffatTutor7y ago#5

You are welcome :-)

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