The breakeven equation for the calculation of the breakeven point stated in dollar values uses the same data that are used in the breakeven equation for the calculation of the breakeven point stated in units of output, although each equation uses the data in somewhat different ways. The equation for the calculation of the breakeven (B/E) point stated in dollar values is as follows:
B/E = Fixed Costs / (1 û Variable Cost Ratio),
where the Variable Cost Ratio (VC Ratio) =
Variable Cost per Unit / Price per Unit
For this company, fixed costs are $113,200, while the total variable cost per unit is $2.20. The B/E stated in dollar values is a follows:
B/E = $113,200 / (1 û ($2.20/$8.00))
Bright Flashlight Company needs $300,000 to take a cash discount of 2/1
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