Annual cost

Break-even Analysis
The annual maintenance coast of machine shop is P 69,994. If the cost of making a forging is P 56 per unit and its selling price is P 135 per forged unit, find the number of unit to be forged to break-even.

Solution: Let: x = number of units to be forged to break-even

Income = 135x
Expenses = 69,994 + 56x

To break-even:
Income = Expenses

135x = 69,994 + 56x
79x =69,994 x = 886 units

Steel drum manufacturer incurs a yearly fixed operating cost of $ 200,000. Each drum manufactured costs $ 160 to produce and sells $ 200. What is the manufacture’s break-even sales volume in drums per year?

Solution: Let: x = number of drums to be sold out per year to break-even

Income = Expenses

200x = 200,000 + 160x 40x = 200,000 x = 5,000 drums

The annual maintenance cost of a machine is P 70,000. If the cost of making a forging is P 56 and its selling price is P 125 per forged unit, find the number of units to be forged to break-even.

Solution: Let: x = number of units to be forged to break-even

Income = Expenses 125x = 56x + 70,000 69x = 70,000 x = 1,014.49 unit ≈ 1,015 units

The following data for year 2000 are available for Cagayan automotive company which manufactures and sells a single automotive product line:

Unit selling price ….. P 40.00
Unit variable cost ...... P 20.00
Unit contribution margin … P 20.00
Total fixed costs … P 200,000.00

What is the break-even point in units for the current year?

Solution: Let: x = number of units pro9duced per month to break-even
Expenses:
Variable cost =20x Fixed charges = 200,000
Total expenses = 20x + 200,000
Total income = 40x

To break-even:
Total income = total expenses

40x = 20x + 200,000 20x = 200,000 x = 10,000

The cost of producing a small