The break-even point in units for Oil Change Co. is the number of cars it needs to service in order to cover the company’s fixed and variable expenses. The break-even point formula is to divide the total amount of fixed costs by the contribution margin per car:
Break-even Point in Cars per Week = Fixed Expenses per week ÷ Contribution Margin per car
Break-even Point in Cars per Week = $2,400 per week ÷ $15 per Car
Break-even Point in Cars per Week = 160 Cars per Week
It’s always a good idea to check your calculations. The following schedule confirms that the break-even point is 160 cars per week:
|
Oil Change Co. |
|
|
Sales (160 cars serviced at $24 per car) |
$ 3,840 |
|
Variable Expenses (160 cars at $9 per car) |
– 1,440 |
|
Contribution Margin |
2,400 |
|
Fixed Expenses |
– 2,400 |
|
Net Income |
$ 0 |
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