Case Study 6-32

Exercise 6-7 Compute the Break-Even Point

1.The equation rule yields the break-even focalize in unit sales, Q, as follows:

| |Profit |= Unit CM × Q ? better expenses |
| |$0 |= ($15 ? $12) × Q ? $4,200 |
| |$0 |= ($3) × Q ? $4,200 |
| |$3Q |= $4,200 |
| |Q |= $4,200 ÷ $3 |
| |Q |= 1,400 baskets |

2.The equation rule can be used to compute the break-even point in sales dollars as follows:


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| |Profit |= CM ratio × gross revenue ? Fixed expenses |
| |$0 |= 0.20 × gross revenue ? $4,200 |
| |0.



20 × Sales |= $4,200 |
| |Sales |= $4,200 ÷ 0.20 |
| |Sales |= $21,000 |

3.The formula rule gives an answer that is identical to the equation method for the break-even point in unit sales:


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4.The formula method also gives an answer that is identical to the equation method for the break-even point in dollar sales:


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Exercise 6-15 Operating Leverage

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