calculate the break-even point in units use the formula: Break-Even point (units) = Fixed Costs ÷ (Sales price per unit – Variable costs per unit) or in sales dollars using the formula: Break-Even point (sales dollars) = Fixed Costs ÷ Contribution Margin.

Suppose there are TWO locations for lunches: One in a higher-income area, and the other in a lower-income area.
A: Fixed Expense = \$5,000. Revenue/unit=\$15. Cost/unit=\$5
B: Fixed Expense = \$6,000. Revenue/unit=\$13. Cost/unit=\$5
Compute breakeven quantity separately for A and B. [Post calculations and your answer]

Combine $A$ and $B$ to compute combined breakeven. [Post calculations and your answer]
Does it look like B is getting a subsidy from A? Is there a different word to use other than 'subsidy'?

Question

calculate the break-even point in units use the formula: Break-Even point (units) = Fixed Costs ÷ (Sales price per unit – Variable costs per unit) or in sales dollars using the formula: Break-Even point (sales dollars) = Fixed Costs ÷ Contribution Margin.

Suppose there are TWO locations for lunches: One in a higher-income area, and the other in a lower-income area.
A: Fixed Expense = \$5,000. Revenue/unit=\$15. Cost/unit=\$5
B: Fixed Expense = \$6,000. Revenue/unit=\$13. Cost/unit=\$5
Compute breakeven quantity separately for A and B. [Post calculations and your answer]

Combine $A$ and $B$ to compute combined breakeven. [Post calculations and your answer]
Does it look like B is getting a subsidy from A? Is there a different word to use other than 'subsidy'?

StudyXY · Accepted Answer

: Calculate the Break-Even Point (units) for location A using the formula: Break-Even point (units) = Fixed Costs ÷ (Sales price per unit – Variable costs per unit) : Simplify the equation by first performing the subtraction inside the parentheses: : Divide to find the Break-Even Point (units) for location A: : Calculate the Break-Even Point (units) for location B using the same formula: : Simplify the equation by first performing the subtraction inside the parentheses: : Divide to find the Break-Even Point (units) for location B: : Calculate the combined Break-Even Point (units) for locations A and B. : Since we don't know the exact number of units for A and B at the combined Break-Even Point, let's call the number of units for A as x and the number of units for B as y. : Now, set up the combined Break-Even Point equation using the formula: Break-Even point (sales dollars) = Fixed Costs ÷ Contribution Margin. : Since we don't have enough information to find the exact values of x and y, we cannot calculate the combined Break-Even Point (sales dollars) for locations A and B. : To answer the question about whether location B is getting a subsidy from location A, let's analyze the Contribution Margin per unit for each location: 	ext{Contribution Margin per unit for B} = \$13 - \$5 = \$8

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Step 1
: Calculate the Break-Even Point (units) for location A using the formula: Break-Even point (units) = Fixed Costs ÷ (Sales price per unit – Variable costs per unit)

Step 2
: Simplify the equation by first performing the subtraction inside the parentheses:

Final Answer

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