Statement Showing Calculation of Breakeven Units

Added on - 21 Apr 2020

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Running head: COSTCostName of the Student:Name of the University:Authors Note:
COST1Table of ContentsProblem 1.........................................................................................................................................2a)......................................................................................................................................................2b)......................................................................................................................................................2c)......................................................................................................................................................3Problem 2.........................................................................................................................................3a)......................................................................................................................................................3b)......................................................................................................................................................4c)......................................................................................................................................................4Problem 3.........................................................................................................................................41.......................................................................................................................................................42.......................................................................................................................................................53.......................................................................................................................................................6Reference.........................................................................................................................................7
COST2Problem 1a)Statement showing calculation of breakeven unitsParticularsAmountSales price$199.00Less:Variable Cost$100.00Contribution$99.00Advertisement expenses (Fixed)$20,000,000.00Break even units202020The above calculation shows that additional 202020 units will be required for makingbreakeven on the advertisement expenses. The current market trend indicates that the sales of theproduct is declining. Therefore, the total sales that will be required to recover the fixed cost is502020 units. That means if the current trend of declining sales continues then this quantity ofsales is not feasible (Cost 2016). However, if the sales increase as a result of advertisingcampaign then it could be possible to attain the higher sales units.b)The Breakeven point is that level of sales where the total cost and the total revenue froma product is equal. In this level of breakeven sales, the total profit of the company is zero. Thecompany will make profit if it makes sales above the breakeven sales. On the other hand, if thesales of the company is less than the breakeven sales then the company will be making losses(Schuster 2015). The calculation and analysis of the breakeven point is very essential because ithelps the management to develops stargazes for profitable operations. The formula forcalculating the breakeven point is:
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