Selling Price of Widget: $3.00

Cost of Goods Sold (Material) $1.00

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.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 :

1. Calculate monthly profit break even
2. Calculate monthly cash break even