Lowell Inc

Finance May 21, 2021

Lowell Inc. is analyzing its cost structure. Its fixed operating costs are $300,000, its variable costs of $3.30 per unit produced, and its products sell for $4.00 per unit. What is the company's breakeven point, i.e., at what unit sales volume would income equal costs?

Expert Solution

Computation of Breakeven Point:

Breakeven Point = Fixed Costs/Contribution Margin

Here,

Fixed Costs = $300,000

Contribution Margin Rati = Sales price per unit - Variable cost per unit

= $4-$3.30

Contribution Margin = $0.7

Breakeven Point = $300,000/0.7 = 428,571.43 or 428,571 units

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