Question

Exercise 18-08 Sunland provides environmentally friendly lawn services for homeowners. Its operating costs are as follows. Depreciation Advertising Insurance Weed and feed materials Direct labor Fuel $1,400 per month $150 per month $2,300 per month $20 per lawn $12 per lawn $3 per lawn Sunland charges $70 per treatment for the average single-family lawn. Determine the company's break-even point in number of lawns serviced per month Break-even point lawns LINK TO TEXT LINK TO VIDEO Determine the company's break-even point in dollars. Break-even point $

Answer 1

Break Even Point (BEP)

Break even point is the point at which total revenue = total cost & no profit no loss .

At break even point total contribution = total fixed cost

A ) Break Even points in number of Lawns serviced per month

total fixed cost = 3850 $

contribution per lawn = 35 $

Break even Quantity = total fixed cost / Contribution per lawn

therefore 3850$ / 35$ = 110 number of lawn services

so 110 numer of lawn service need to reach break even point

working note :

sales per lawn	70 $
variable cost per lawn (less)	35 $
contribution per lawn	35 $
total Fixed cost	3850 $

Variable cost = 20 $ +12 $ + 3 $

fixed cost= 1400 $ +150 $ +2300 $

B) Break Even Point in Dollars

sales per lawn =70 $

variable cost per lawn = 35 $

total fixed cost = 3850 $

contribution per lawn = 70$ - 35$ = 35 $

C/S Ratio = contribution per lawn / sales per lawn * 100 = 35 $ / 70 $ *100 = 50 %

Break even sales = total fixed cost / c/s ratio = 3850 $ / 50 % * 100 = 7700 $

so, company's Break Even Point in Dollars is 7700 $