PNG electric company manufactures a number of electric products.

Rechargeable light is one of the

PNGs products that sells for $180/unit. Total fixed expenses related to rechargeable electric light are
$270,000 per month and variable expenses involved in manufacturing this product are $126 per unit.
Monthly sales are 8,000 rechargeable lights.

Solution:
(1) Computation of break-even point:
a. Break even point in units:
Break even point in units can be computed by using either equation method or contribution margin
method. Both the methods are given below:

Equation method:
Sales = Variable expenses + Fixed expenses
$180Q = $126Q + 270,000
$180Q $126Q = $270,000
$54Q = $270,000
Q = $270,000/$54
Q = 5,000 Units

Contribution margin method:

Break even point = Fixed expenses/Contribution margin per unit
270,000 / 54*
= 5,000 units
*$180 $126