All That Blooms provides environmentally friendly lawn services for homeowners.

Question

All That Blooms provides environmentally friendly lawn services for homeowners. Its operating costs are as follows Depreciation Advertising Insurance Weed and feed materials Direct labor Fuel 1,500 per month $4,338 per month $1,200 per month $4 per lawn $3 per lawn $1 per lawn All That Blooms charges $77 per treatment for the average single-family lawn. Determine the company's break-even point in number of lawns serviced per month. Break-even point lawns Determine the company's break-even point in dollars. (Round answer to 0 decimal places, e.g. 1,225.) Break-even point Click if you would like to Show Work for this question: Open Show Work

Explanation / Answer

a. Break even point 102 units Working: 1) Calculation of Fixed Expenses: Depreciation         1,500 Advertising         4,338 Insurance         1,200 Total Fixed Costs         7,038 2) Calculation of total variable costs: Weed and feed materials $             4 Direct Labor $             3 Fuel $             1 Total Variable costs $             8 3) Calculation of contribution margin per unit Sales Price per unit $          77 Less variable cost per unit $             8 Contribution Margin per unit $          69 4) Calculation of Break even point in units Break even point in units = Fixed Costs / Contribution margin per unit = $       7,038 / $          69 = 102 b. Berak even point $    7,854 Working: a. Contribution margin ratio = Contribution Margin / Sales = $             69 / $          77 = 89.61% b. Break even units = Fixed Cosst / CM ratio = $       7,038 / 89.61% = $       7,854 CM Stands for Contribution Margin.

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