Break-Even Analysis

Break-Even AnalysisCompany "A" Plans to Sale Units for $100Variable Cost:Employee Wages $8 per Hour (4 hours per unit)Supplies $1 per UnitOther Variable Cost $2 per Unit Total - $35Fixed Cost:Depreciation $3,000Factory Lease $7,000Advertising Cost $6,000Other Fixed Cost $4,100 Total - $20,100

Employee wages $32 (5 hours* $8/hour), supplies $1, Other variable $2

1Break-Even in SalesUnits Price Variable Cost = Contribution per Unit$100 - $35*= $67 Contribution per Unit SoldFixed Cost / Contribution per Unit Sold = Break-even in Units Sold$20,100 / $67 = 300 Units to Break-even

To Earn a Profit of $21,000(Fixed Cost + Target Profit) / Contribution = Units Sells Required to Reach Target Profit ($20,100 + $21,000) / $67 = 600 Units Sold to Earn $21,000 Profit