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linda_us
linda_us, Master's Degree
Category: Single Problem
Satisfied Customers: 7291
Experience:  A tutor for Business, Finance, Accounts and other related topics.
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Customer: replied 3 years ago.

Hi Linda,


 


In the second part I understand that the 1200 buy in needs to be included in order to reach the break-even point, but why is it divided by the $22 selling price less the $1 commission and $2 trading card = $19, rather than divided by the $12 cost per unit plus the $3 for the commission and trading card?


1200/ 19= 63 versus 1200/15=80

Hi Nicole

I have provided that explanation right after the calculation

" Normal the breakeven point is calculated by dividing fixed cost by contribution margin but in the current scenario the cost spend on purchasing 100 units is treated as the cost to be recovered to calculate breakeven. To start this venture minimum of 100 unit has to be purchase (the cost of $1200) hence until the amount spent on purchasing 100 units is recovered breakeven cannot be achieved"

 

By selling each unit company will recover $19 (after additional expenses) since all the variable cost incurred earlier is now to be recovered hence it is not subtracted again and the Breakeven is calculated as 1200/19.

linda_us and other Single Problem Specialists are ready to help you

By selling each unit company will recover $19 (after additional expenses). Since all the variable cost incurred earlier is now to be recovered hence it is not subtracted again and the Breakeven is calculated as 1200/19.

Customer: replied 3 years ago.

Okay. Thanks.


 

You are welcome.

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