Break Even

ENGINEERING ECONOMICS – SESSION 9

SEATWORKS
PROBLEM #01

• Suppose ADI Corporation’s Break-even sales

volume is $450,000 with fixed costs of
$200,000.
a.Compute for the Contribution Margin
Percentage
b.Compute for the selling price if variable costs
are $12 per unit
PROBLEM #02

• Given the following information

• The ratio of variable cost per unit divided by
selling price per unit equals 0.25
• Fixed Costs Amount to $50,000
a. What is the Break-even point
b. What effect would a 6% decrease in selling price
have on the break even point from part a?
PROBLEM # 3
The Austin Electric Company has three product lines of surge protectors
commonly used in PC and other electronic devices—A, B & C– Having a
contribution margin of $3, $2 and $1 respectively. The president foresees sales of
$200,000 units in the coming period, consisting of 20,000 units of A, 100,000 units of
B and 80,000 units of C. The company’s fixed costs for the period are $255,000.
a. What is the company’s break-even point in units, assuming that the given sales
mix is maintained?
b. If the mix is maintained, what is the total contribution margin when 200,000
units are sold? What is the operating income?
c. What would be the operating income if $20,000 units of A, 80,000 units of B, and
100,000 units of C were sold? What is the new break-even point in units if these
relationships persist in the next period?