John produces furniture's which he sells at his sales office .he estimates that the investment for plant and equipment will be $225000,where labor material,packaging,shipping will be about $1000 per item.if the furniture's are sold for $3000 each what volume is necessary for john to break even ?

Breakeven volume is the number of output required for the firm to achieve a zero profit, where total costs are the same as the total revenue.

Breakeven can be determined as the fixed cost divided by the contribution margin per unit(i.e. sales price minus variable cost)

breakeven=fixed cost /(sales price-variable cost per unit)

fixed cost=cost of plant and equipment=$225000

sales price-variable cost per unit=$3,000-$1,000

sales price-variable cost per unit=$2,000

breakeven=$225000/$2,000

breakeven=112.50(units of furniture cannot be fractional, 113 is the correct answer)

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anthougo anthougo · Answer 2 · 2025-04-27T18:00:02-04:00

To break even, the volume of production and sales that John requires is 113 units of furniture.

What is break-even analysis?

Break-even analysis is an accounting tool that shows the break-even point and enables management to make production and sales volume decisions.

At the break-even point, the total costs and total revenue are equal. This implies that at this point, there is no profit or loss.

The break-even point in units can be computed as fixed costs divided by contribution margin per unit.

Data and Calculations:

Fixed costs = $225,000

Variable costs (direct labor, materials, and selling) = $1,000

Selling price per unit = $3,000

Contribution margin per unit = $2,000 ($3,000 - $1,000)

Break-even point in units = 113 ($225,000/$2,000)

Thus, to break even, the volume of production and sales that John requires is 113 units of furniture.

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