E22-5. Compute break-even point in units and dollars. (LO 3, 4) All That Blooms

Question

E22-5. Compute break-even point in units and dollars. (LO 3, 4) All That Blooms provides environmentally friendly lawn services for homeowners. Its operating costs are as follows. Depreciation $1,400 per month Advertising $200 per month Insurance $2,000 per month Weed and feed materials $12 per lawn? Direct labor $10 per lawn? Fuel $2 per lawn? All That Blooms charges $60 per treatment for the average single-family lawn. Instructions Determine the company's break-even point in (a) number of lawns serviced per month and (b) dollars.

Explanation / Answer

(a) Fixed costs = $1,400 + $200 + $2,000 = $3,600

Contribution margin per lawn = $60 – ($12 + $10 + $2) = $36

Break-even point in lawns = $3,600 ÷ $36 = 100

(b) Break-even point in dollars = 100 lawns X $60 per lawn = $6,000 per month

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