Break even problem set #1

Per unit analysis:

1. Bob sells pallets to large companies who use them to ship products. His cost for pallets is $4.00 each (variable costs) and he sells them for $6.00 each. He rents an office, has telephone service, and uses an accountant to keep books. The cost for all of those is $3,000 per month (fixed costs). He does not pay a commission to anyone.
   1. How many pallets does Bob have to sell each month to breakeven?
   2. If he wants to earn $3,000 per month for himself (profit in the business) how many pallets does Bob have to sell each month?

2. Charles has a fuel oil company. His cost for fuel oil averages $1.90 per gallon. He sells his fuel oil for an average of $2.50 per gallon. He also pays a $.05 per gallon commission to his sales people and an average of $.25 per gallon to his delivery drivers. His overhead costs, including his salary, are $12,000 per month.
   1. What is his monthly breakeven sales figure (in dollars)?
   2. How many gallons does he need to average in sales per month to break even?
   3. If he only sells 5,000 gallons per month from May through August, how many gallons does he need to average each of the other months to break even?

Percent of sales analysis:

3. Mark sells hand-made jewelry at craft shows. He averages 40% gross margin on his jewelry (the price-costs/price is 40%). To register as a vendor, drive, feed himself at a show, and stay the night somewhere averages $400 per show.
   1. How much (in dollars) does Mark have to sell at the average show to break even?
   2. If Mark wants to make $1,000 per show (profit per show) how much does he have to sell (in dollars)?
4. Dan has opened a small retail store. His fixed costs (not counting paying himself) each month are $15,000. By the third month, he realizes his gross margin percentage is 30%.

1. What gross revenue (sales) does he need to produce to break even?
2. What gross revenue does he need to produce to pay himself $3,000 per month?