Calculate the break-even point

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Question - Scholar Backpacks Pty Ltd has estimated that budgeted production and sales of its backpacks during the coming year will be 70 000 units at an average price of $60 per unit. Variable manufacturing costs are estimated to be $24 per unit, and variable marketing costs $12 per unit sold. Fixed costs are expected to amount to $1 080 000 for manufacturing and $432 000 for marketing. There will be no beginning or ending work in process inventory or finished goods inventory. (Ignore income taxes.)

1. The company has estimated that if sales are less than 50 000 units, then budgeted manufacturing fixed costs will drop to $600 000. Other budgeted costs remain unchanged. Calculate the break-even point when sales fall below 50 000 units.

2. How would this look in a graph, highlighting the two break-even points?

Reference no: EM132944363

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