I am working on calculating the Break even point of this problem and I want to verify that I am on the right track. The company is selling shoes at @ $220 per show. The cost of the shoes are $110 per shoe. The costs associated are fixed rent of #13333 per month, variable rent at 3% of sales, other expenses at $38,000 monthly and interest at $11,667. This is what I did so far:

Price per unit would be $220

Variable cost per unit would be $110

The variable rent @ 3 % of sales would be 6.60 (I took 3% of 220)

Fixed Costs would be 6300 (13,333 plus, 38,000 plus 11,667)

I then calculated the contribution margin by taking $220 minus $116 ($116 I got by adding the variable cost per unit of 110 plus 6.60)

Contribution margin=103.40

Next I calculate the contribution margin ratio and took my contribution margin of $103.4 divided by the selling cost of $220. My calculation came to .47.

Then to get the total sales in dollars I took the total fixed costs of 63,000 divided by the contribution margin ratio of .47 to equal $134,042.

The number of shoes was calculated by dividing the total fixed cost by the cost of the shoes, which I rounded to 573.

pur-new-sol

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