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Problem #2: CVP Selling price per test prep package $200
| Problem #2: CVP | |||||||
| Selling price per test prep package | $200.00 | ||||||
| Cost per test prep package | $120.00 | ||||||
| Rental fee | $3,000 | ||||||
| Sales volume estimates (# test prep kits) | 50.0 | ||||||
| 1. Calculate the break even sales volume (2 points) | BE sales volume | 37.5 | |||||
| target operating income | $0 | ||||||
| CM | $80 | ||||||
| FC | $3,000 | ||||||
| BE sales volume | 37.5 | ||||||
Expert Solution
Break-even point is the level of sales at which there is neither profit nor loss. It is a scenario where the profit equals zero.
It is usually either express in sales volume or sales amount
Break-even sales volume can be calculated using the formulae:
Break-even sales volume = Fixed Cost / Contribution Margin
Fixed Cost = $ 3,000
Contribution Margin = selling price per unit - Variable cost per unit
= $200 - $ 120
= $ 80
Therefore,
Break-even Sales (in Volume) = 3,000 / 80
= 37.5 test prep packages
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