Break Even is the level of operations where Profit equals zero. EXERGISE 1: Abner Corporation makes a product that sells for $200 per unit. The Variable Costs per unit are $120. Fixed Costs total $500,000 each year. Abner currenly sells 7,500 units per year. Calculate the number of units that Abner must sell to break even. Use the equation mehod to solve for the number of units Abner needs to sell to breakeven. If you need help, refer to the examples in the text Equation Mehod Sales Variable Costs Fixed CostsProfit STEP 1- Set profit to ZERO STEP 2-Sove for N STEP 3-Sove for N STEP 4: Breakeven in UNITS In STEP 3 above, solving for N resulted in dividing Fixed Costs by Unit Contribution Margin. Remember, Unit Contribution Margin (UCM) is calculated as folows Unit Contribution Margin (UCM)Sales Price per Unit Variable Cost per Unit So, an easier way to caloulate the breakeven point in units is simply use this formula: Fixed CostsUCMBreakeven in Units units Breakeven in sales dollars? To get breakeven in sales dollars, you could simply multiply the breakeven in units by the sales price per unit. Or, you can use the Contribution Margin Ratio Contribution Margin SalesContribution Margin Ratio What is the Contribution Margin Ratio for Abner? Now that you have the Contribution Ratio (CM Rato), just use the same breakeven formula as before but replace the UCM with CM Ratio Fixed Costs CM RatioBreakeven in Sales dollars CM Ratio Fixed Costs