# Breakeven Point

Topics: Paleolithic, The Profit Pages: 3 (490 words) Published: April 27, 2011
3.1
Breakeven point - Unit sales
Profit = sales – variable expenses – fixed expenses

Since the break-even point is the level of sales at which the company’s profit is zero we have: 0 = 30Q – 20Q -150000
10Q = 150000
Q=15000
Thus at 15000 units the company will break even.
Breakeven point - Rand sales
The breakeven point in total sales Rands can be computed by multiplying the breakeven level of unit sales by the selling price per unit: 15000 x R30 = R450 000

3.2
Profit = sales – variable expenses – fixed expenses
= 20000(30) – 20000(20) – 150000
=50000
3.3 marin of safety = total budgeted (or actual) sales – breakeven sales = 25000(30) - 450000
=750000-450000=300000
Margin of safety ratio= margin of safety in Rands/Total budgeted (or actual) sales in Rands =300000/750000=0.4

3.4
Profit = sales – variable expenses – fixed expenses
0=30Y – 15.5Y-(150000+82000)
14.5Y=232000
Y=16000
Thus at 16000 units the company will break even with the new payment structure. 3.5
Profit = sales – variable expenses – fixed expenses
=30(20000) – 15.5(20000) – (150000+82000)
=58000
3.6
By eliminating the commission structure and giving the employees extra salaries can either increase or decrease the profit depending on the number of units sold.  |  |  |
units| Profit with old structure| Profit with newstructure| 0| -150000| -232000|
1000| -140000| -217500|
2000| -130000| -203000|
3000| -120000| -188500|
4000| -110000| -174000|
5000| -100000| -159500|
6000| -90000| -145000|
7000| -80000| -130500|
8000| -70000| -116000|
9000| -60000| -101500|
10000| -50000| -87000|
11000| -40000| -72500|
12000| -30000| -58000|
13000| -20000| -43500|
14000| -10000| -29000|
15000| 0| -14500|
16000| 10000| 0|
17000| 20000| 14500|
18000| 30000| 29000|
19000| 40000| 43500|
20000| 50000| 58000|
21000| 60000| 72500|
22000|...