Break Even = BE
Cost of Goods Sold Per Unit = CGS
Operating Expenses = OE
Price = P
Gross Margin Per Unit = GM *This number represents the amount of money per unit that can be used to contribute to cover fixed costs and add to profit.
BE = OE / (P-CGS)
GM = (P-CGS)
Use this formula to check your answers
Revenue = Expenses
Revenue = (PRICE * Quantity)
Expenses = (Fixed Costs + (CGS * Quantity)
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Problem 1-5 help you find the units that you would need to sell to break even assuming you knew the costs
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1) So if the price of a cup of coffee at Clemens Perks costs $3 and the CGS per unit are $0.50 what is the Gross Margin?
GM = (P-CGS)
Answer:
2) If the CGS per unit for coffee at Clemens Perks are $0.50, the price is $3, and the Operating Expenses are $10,000/year. How many units must Clemens Perk sell to break even in the first year?
BE = OE / (P-CGS)
Answer:
If the CGS per unit for coffee at Clemens Perk decrease to $0.25 and everything else remains the same as above, now how many units must Clemens Perk sell to break even in the first year?
BE = OE / (P-CGS)
Answer:
3) If Clemens Perk decided that it wants to make $5,000 in its first year how many units must it sell to achieve this goals? (assume $0.50 CGS)
To target a profit level
Profit Target = (OE + profit target) / (P – CGS)
This means
5k Target = (OE + 5,000) / (P – CGS)
Answer:
If Clemens Perk decides that it wants to make $8,000 in its first year how many units must it sell to achieve this goal? (Assume $0.50 Variable costs)
Profit Target = (OE + profit target) / (P – CGS)
Answer:
4) If Clemens Perk decides that it wants to make $9,000 in its first year how many units must it sell per month (assuming they are open only 8 months) to achieve this goal? (Assume $0.50 Variable costs)
Profit Target = (OE + profit target) / (P – CGS)
Units / Months = Per month number
Answer:
Answer:
Break Even Sales: It is the volume of sales at which the total cost is equal total revenue