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Current Attempt in Progress Sheridan Company has a unit selling price of \( \$ 700 \), unit variable costs of \( \$ 400 \), and fixed costs of \( \$ 302,700 \). Compute the break-even point in sales units using (a) the mathematical equation and (b) unit contribution margin. Break-even point (a) Mathematical Equation (b) Unit contribution margin

Ask by Cummings Guzman. in the United States
Feb 28,2025

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The break-even point is 1,009 units.

Solución

Sheridan Company has the following data: • Selling price per unit = $700 • Variable cost per unit = $400 • Fixed costs = $302,700 Step 1. Calculate the Unit Contribution Margin   Unit contribution margin = Selling price – Variable cost    = $700 – $400 = $300 (a) Mathematical Equation: At break-even, Total Revenue = Total Costs (Fixed + Variable) Let X be the break-even sales units.   Total Revenue = $700 × X   Total Variable Cost = $400 × X   The break-even equation is:    $700X = $400X + $302,700 Simplify by subtracting $400X from both sides:    $300X = $302,700 Solve for X:    X = $302,700 / $300    X = 1,009 units (b) Unit Contribution Margin Approach: Break-even units = Fixed Costs ÷ Unit Contribution Margin   = $302,700 ÷ $300   = 1,009 units Thus, using both methods, the break-even point is reached at 1,009 units.

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To find the break-even point in sales units, we can use two methods. (a) Using the mathematical equation, the break-even point (BEP) occurs when total revenue equals total costs. The equation is: \[ BEP = \frac{Fixed Costs}{Selling Price - Variable Costs} \] Substituting the provided values: \[ BEP = \frac{302,700}{700 - 400} = \frac{302,700}{300} = 1,009 \text{ units} \] (b) The unit contribution margin is calculated as: \[ Unit Contribution Margin = Selling Price - Variable Costs = 700 - 400 = 300 \] Now, using this for the break-even point: \[ BEP = \frac{Fixed Costs}{Unit Contribution Margin} = \frac{302,700}{300} = 1,009 \text{ units} \] So, the break-even point is 1,009 units using both methods!

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