document.write( "<A HREF=/cgi-bin/jump-to-question.mpl?question=1026025>Question 1026025</A>: <I><SPAN STYLE=\"word-break: break-all;\"> The superior jumpdrive company sells jump drives for $10 each. Manufacturing cost is $2.60 per jump drive; marketing costs are $2.40 per jump; and royalty payments are 20% of the selling price. The fixed cost of preparing the jump drive is $18000. Capacity is 15000 jump drives.\r<BR>\n" );
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document.write( "Compute the breakeven point graphically & by using the conrtibution margin approach </SPAN>\n" );
document.write( "</I><HR><TABLE width=100%><TR><TD><B><A HREF=http://www.algebra.com/>Algebra.Com's</A> Answer #641290 by </B><A HREF=/tutors/aboutme.mpl?userid=Theo><B>Theo(13342)</B></A><img src=\"/images/stars/stars-13.gif\" alt=\"\" >&nbsp;<A HREF=/tutors/aboutme.mpl?userid=Theo><IMG SRC=http://www.algebra.com/images/aboutme-small.gif BORDER=0 alt=\"About Me\" VALIGN=MIDDLE></A>&nbsp;<IMG SRC=http://www.algebra.com/cgi-bin/show-face.mpl?user=Theo><BR>You can <A HREF=\"/cgi-bin/embed-solution.mpl?show=1&solution=641290\">put this solution on YOUR website!</A><BR><SPAN STYLE=\"word-break: break-all;\"> f = fixed cost.<BR>\n" );
document.write( "s = selling price per unit.<BR>\n" );
document.write( "c = cost per unit.<BR>\n" );
document.write( "p = profit<BR>\n" );
document.write( "x = number of units.\r<BR>\n" );
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document.write( "the contribution margin approach says that:\r<BR>\n" );
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document.write( "(s - c) * x - f = p\r<BR>\n" );
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document.write( "this formula says that the selling price per unit minus the cost per unit, times the number of units, minus the fixed cost equals profit.\r<BR>\n" );
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document.write( "when you break even, profit is equal to 0, so p = 0, and the formula becomes:\r<BR>\n" );
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document.write( "(s - c) * x - f = 0\r<BR>\n" );
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document.write( "if you add f to both sides of the equation, then the equation becomes:\r<BR>\n" );
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document.write( "(s - c) * x = f\r<BR>\n" );
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document.write( "if you divide both sides of the equation by (s - c), then the equation becomes:\r<BR>\n" );
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document.write( "x = f / (s - c)\r<BR>\n" );
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document.write( "f is equal to the fixed cost of 18,000.\r<BR>\n" );
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document.write( "s is equal to the selling price of 10 dollars per unit.\r<BR>\n" );
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document.write( "c is equal to the variable cost per unit.\r<BR>\n" );
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document.write( "those costs are:\r<BR>\n" );
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document.write( "manufacturing cost of 2.60 per unit.<BR>\n" );
document.write( "marketing cost of 2.40 per unit.<BR>\n" );
document.write( "royalty payments of 20% of the selling price per unit.<BR>\n" );
document.write( "that would be equal to 20% * 10 dollars per unit = 2 dollars per unit.\r<BR>\n" );
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document.write( "total variable costs per unit are therefore 2.60 + 2.40 + 2 = 7 dollars per unit.\r<BR>\n" );
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document.write( "at breakeven, the formula of x = f / (s - c) becomes:\r<BR>\n" );
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document.write( "x = 18000 / (10 - 7) = 18000 / 3 = 6000.\r<BR>\n" );
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document.write( "breakeven point is when the number of units sold is 6000.\r<BR>\n" );
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document.write( "the total revenue is 6000 * 10 = 60,000<BR>\n" );
document.write( "the fixed cost is 18,000<BR>\n" );
document.write( "the variable cost is 6000 * 7 = 42,000\r<BR>\n" );
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document.write( "the profit is equal to the total revenue minus the total cost.\r<BR>\n" );
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document.write( "total revenue is 60,000<BR>\n" );
document.write( "total cost is 18,000 + 42,000 = 60,000<BR>\n" );
document.write( "profit is total revenue minus total cost = 0.\r<BR>\n" );
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document.write( "the graphical solution would look like this.\r<BR>\n" );
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document.write( "<IMG STYLE=\"max-width:80%;\" src = \"http://theo.x10hosting.com/2016/032103.jpg\" alt=\"$$$\" </>\r<BR>\n" );
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document.write( " </SPAN>\n" );
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