Cash$/$Finance Lecture Widget Business

Problem $1$: Break Even Analysis

Selling Price of Widget: $$3\mathrm{.}00$

Cost of Goods Sold $($Material$)$ $$1\mathrm{.}00$

Assume that there are only material costs associated with the Cost of Goods Sold $($COGS$)$ That is$,$ there is no labor or other direct items associated with the manufacture of the product. For the purposes of this exercise, I have classified direct labor in fixed costs.

Fixed Costs $($Dir$.$ Labor, Overhead, SG&A$)$: $$30,000/$month Machinery & Equipment: $$240,000$

$($Assume machinery and equipment is on books at $$240,000$ as of Jan$\mathrm{.}1$ with a $10-$year useful life. For ease of calculation, you can assume straight$-$line depreciation. You can assume it was an equity contribution made by the founder$).$

Question Set $1$:

$$ Calculate monthly profit break even

$$ Calculate the monthly cash break even

Show work and use both the "total revenue $-$ total cost" approach and break even using the "fixed cost$/$contribution margin" formula.