Question

Please help me solve this question by showing all your work so I can have a clear understanding of how to solve this problem:

Part 1: Bill Needles makes and sells customized silver belt buckles for $225 each. He has determined that his fixed costs are $8,000, and his average variable costs per buckle are $145. What is his break-even point in units? Break-even volume = Fixed Cost/Price – Variable Cost so this problem is $8,000/225-145 = $100.00

Part 2 - How do I solve for the break-even point?

Assume that in the scenario from the previous question, the total market for custom silver belt buckles in the region is estimated at 500. What kind of market share will Bill need to secure in order to break even?

Answer 1

1) Break even is the point of sales where there is no Profit and No loss

Contribution margin = Selling Price Per unit- Variable cost per unit

=225 -145 =80

Break even Point in units = Fixed Cost/Contribution Margin

=8,000/80 =100 units

2)Total Market Share = 500 units

Market share will Bill need to secure in order to break even =100/500 =20% Share