tion of the breakeven point stated in units of product, although each equation uses the data in slightly different formats. The equation for the determination of the breakeven (B/E) point stated in monetary 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
In this case, Fixed costs total $113,200, while the total variable cost per unit is $2.20. The B/E stated in monetary 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 2/10 net 70. A bank will loan the money for 60 days at a total interest cost of $5,500.
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