Question

Calculating breakeven point in units, contribution margin ratio given

Ocean Company sells a product with a contribution margin ratio of 80%. Fixed costs are \(2,800 per month. What amount of sales (in dollars) must Ocean Company have to break even? If each unit sells for \)30, how many units must be sold to break even?

Short answer

The amount of sales is $3,500 and units are 117.

Step-by-step solution

Calculation of amount of sales (in dollars)

$$\begin{gathered} \mathit{R}\mathit{e}\mathit{q}\mathit{u}\mathit{i}\mathit{r}\mathit{e}\mathit{d}\mathbf{}\mathit{s}\mathit{a}\mathit{l}\mathit{e}\mathit{s}\mathbf{}\mathit{i}\mathit{n}\mathbf{}\mathit{d}\mathit{o}\mathit{l}\mathit{l}\mathit{l}\mathit{e}\mathit{r}\mathit{s}\mathbf{=}\mathbf{}\mathit{F}\mathit{i}\mathit{x}\mathit{e}\mathit{d}\mathbf{}\mathit{c}\mathit{o}\mathit{s}\mathit{t}\mathit{s}\mathbf{+}\mathit{T}\mathit{a}\mathit{r}\mathit{g}\mathit{e}\mathit{t}\mathbf{}\mathit{p}\mathit{r}\mathit{o}\mathit{f}\mathit{i}\mathit{t}\mathbf{/}\mathit{C}\mathit{o}\mathit{n}\mathit{t}\mathit{r}\mathit{i}\mathit{b}\mathit{u}\mathit{t}\mathit{i}\mathit{o}\mathit{n}\mathbf{}\mathit{m}\mathit{a}\mathit{r}\mathit{g}\mathit{i}\mathit{n}\mathbf{}\mathit{r}\mathit{a}\mathit{t}\mathit{i}\mathit{o} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\frac{\mathbf{\$}\mathbf{2}\mathbf{,}\mathbf{800}\mathbf{+}\mathbf{\$}\mathbf{0}}{\mathbf{80}\mathbf{\%}} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{3}\mathbf{,}\mathbf{500} \end{gathered}$$

If each unit sell for $30, how many units must be sold to breakeven

$$\begin{gathered} \mathbf{Rquired}\mathbf{}\mathbf{sale}\mathbf{}\mathbf{in}\mathbf{}\mathbf{units}\mathbf{}\mathbf{=}\mathbf{}\frac{\mathbf{Fixed}\mathbf{}\mathbf{costs}\mathbf{+}\mathbf{Target}\mathbf{}\mathbf{profit}}{\mathbf{contribution}\mathbf{}\mathbf{margin}\mathbf{}\mathbf{per}\mathbf{}\mathbf{unit}} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\frac{\left(\$2,800+\$0\right)}{\mathbf{\$}\mathbf{30}\mathbf{\times }\mathbf{80}\mathbf{\%}} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\frac{\mathbf{\$}\mathbf{2}\mathbf{,}\mathbf{800}}{\mathbf{\$}\mathbf{24}} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{117}\mathbf{}\mathbf{units} \end{gathered}$$