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  • Alrich Farm - BEP Explanation

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    Alexander Cordova
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    The document analyzes the breakeven point for two product lines - crops and livestock - at Alrich Farm in 2015. It finds that total revenue was $224,743, with $198,465 from crops and $26,278 from livestock. While crops contributed more to revenue, livestock had a higher contribution margin and lower variable costs. The breakeven point for crops was calculated to be $236,427 while livestock's was $16,483, showing that livestock covers more of the fixed costs.

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    The document analyzes the breakeven point for two product lines - crops and livestock - at Alrich Farm in 2015. It finds that total revenue was $224,743, with $198,465 from crops and $26,278 from livestock. While crops contributed more to revenue, livestock had a higher contribution margin and lower variable costs. The breakeven point for crops was calculated to be $236,427 while livestock's was $16,483, showing that livestock covers more of the fixed costs.

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    © All Rights Reserved
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    7 views1 page

    Alrich Farm - BEP Explanation

    Uploaded by

    Alexander Cordova
    The document analyzes the breakeven point for two product lines - crops and livestock - at Alrich Farm in 2015. It finds that total revenue was $224,743, with $198,465 from crops and $26,278 from livestock. While crops contributed more to revenue, livestock had a higher contribution margin and lower variable costs. The breakeven point for crops was calculated to be $236,427 while livestock's was $16,483, showing that livestock covers more of the fixed costs.

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    © All Rights Reserved
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    The breakeven analysis is used to determine the amount of revenue that must be obtained to cover

    fixed cost or zero profit. The Alrich Farm has two product lines, livestock and crop products. Total
    revenue for the year 2015 amounting to $224,743.00. $198,465 or 88.31% of which is from crop
    products and only $26,278 or 11.69% for livestock products. Although crop products contribute more to
    the revenue of the farm but its variable cost is also high which is $125,665.00. For livestock products, its
    variable cost is only $7,971. Contribution margin of crop is $72,800 or 36.68% while $18,307 or 69.67%
    for livestock.

    The fixed cost for two product lines is obtained by multiplying the sales mix percentage by fixed cost.
    Fixed cost for Crop is $86,725.06 ($98,208 X 88.31%) and $11,482.94 ($98,208 X 11.69%). Breakeven for
    crop is $236,427.05 while $16,482.69 for livestock. It means that crop revenues must be $236,427.05 to
    breakeven or zero profit while it takes $16,482.69 for livestock to breakeven or zero profit.

    Since revenue of crop is $198,465.00 which is lower to $236,427.05 by ($37,962.05) while revenue of
    livestock is $26,278 which is higher to breakeven sales of $16,482.69 by $9,795.31. Livestock product
    covers more fixed cost compare to crop product.

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