Breakeven equation and covering costs

- Now, remember back to our CVP equation,…selling price times the number of units…less the variable cost times the number of units…less our fixed costs equals our profit.…You remember that?…And remember that our breakeven point…is the point at which profits equal zero.…We have exactly covered all of our fixed costs.…That would look like this.…In our landscaping example,…we were able to compute our breakeven point to be 618,…that is we need to work 618 jobs during the year…to break even to cover all of our costs.…

Let's demonstrate the mechanics of the breakeven equation…with a simple example.…Suppose Stice & Stice Company reports the following…related to a product that they manufacture and sell.…Direct materials costs are $2.25 per unit,…direct labor cost per unit, $4.25,…variable overhead cost per unit, $1.80,…for total variable costs of $8.33 per unit.…Okay now to fixed costs.…There is monthly rent of $2,200,…monthly depreciation on equipment of $741,…and other monthly fixed costs of $2,400,…like salaries and insurance and such,…