A store sells TV units at P12,500 each. Each TV costs the store P8,000 per unit from the supplier and
additional P250 per unit for shipping. Their two salesmen are paid P8,000 for monthly salary and their store
manager is paid P15,000 monthly. To encourage their salesmen, they give them P300 per unit they sell.
The store also giveaway some giveaways amounting to P150 per unit.

(a) How many units must the store sell every month to break-even?

To break-even, the store's total revenue must be equal to the total costs (variable and fixed). The Break-even units in sales are computed as fixed costs/contribution margin per unit.

The store's contribution margin per unit is the difference between its sales price per unit and the variable cost per unit.

Data and Calculations:

Selling price per unit = P12,500

Variable costs per unit:

Cost price per unit = P8,000

Sales Commission per unit = P300

Giveaways per unit = P150

Total variable cost per unit = P8,450 (P8,000 + P300 + P150)

Contribution margin per unit = P4,050 (P12,500 - P8,450)

Fixed costs per month:

Salesmen salaries = P8,000

Store manager = P15,000

Total fixed costs per month = $23,000

Break-even sales units = Fixed costs/Contribution per unit

= P23,000/P4,050

= 6 units

Thus, at break-even, the store must sell 6 units and the total revenue will be P75,000 (P12,500 x 6) and the total variable costs will be P50,700 (P8,450 x 6) with the fixed costs as P23,000.

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