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+6 votes
asked by (1.8k points)

2 Answers

+3 votes
answered by (820 points)
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Best answer
Assume that the cost is $100.

Current price - $200
Current profit - $100 (with 50% margin and 100% markup)

Price after discount - $150 (after 25% off)
Profit after discount - $50

(Current profit) / (Profit after discount) = 100 / 50 = 2

You need to sell twice as much for the break even or  to make the same dollar amount of gross profit.
commented by (1.8k points)
+1
Great explanation with a simple assumption. Thanks!
+3 votes
answered by (730 points)
Break even point (BEP) can be calculated by dividing the total fixed costs to the contribution margin ratio. If you are basically dividing this margin value into two (50% / 25% = 2), then you have to sell twice as much in order to reach the BEP.
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