QUESTION 1

Compute the Break-Even Point

Mackson Products distributes a single product, a woven basket; its selling price is $8 and its variable cost is $6 per unit. The company's monthly fixed expense is $5,500.

Required:

1. Solve for the company's break-even point in unit sales using the equation method.

1. Solve for the company's break-even point in sales dollars using the equation method and CM ratio.

1. Solve for the company's break-even point in unit sales using the contribution margin method.

1. Solve for the company's break-even point in sales dollars using the contribution margin method and the CM ratio.

QUESTION 2

Break-Even Analysis and CVP Graphing

Horace Society is planning its annual Western Fair Raceway Gala. The Gala committee has assembled the following expected costs for the event:

Dinner (per person) $10

Gaming tokens and program (per person) $2

Prize payouts $4,300

Tickets and advertising $800

Private box suite rental $1,700

Lottery licences $200

The committee members would like to charge $40 per person for the evening's activities.

Required:

1. Compute the break-even point for the Gala (in terms of the number of persons that must attend.)
2. Assume only 200 persons attended the Gala last year. If the same number attend this year, what price per ticket must be charged to break even?
3. Using the $40 ticket price per person amount, prepare a CVP graph for the Gala from zero tickets up to 600 tickets sold.