Break-even point. Please help me understand how to get the fixed and variable cost in order to determine the break-even point in units of output for the following:

Output level 10 million

Return on operating assets= 25%
Operating asset turnover= 5 times
Operating asset =$20 million
Degree of operating leverage= 4 times

Help??? I just cant get it.. I need to understand in order to answer the rest of the questions. Thanks in advance

To calculate the break-even point in units of output, we first need to determine the fixed costs and variable costs. Here's how you can do it step by step:

1. Calculate the net operating income (NOI):
NOI = Operating asset * Return on operating assets
NOI = $20 million * 25% = $5 million

2. Calculate the contribution margin per unit:
Contribution margin per unit = NOI / Output level
Contribution margin per unit = $5 million / 10 million units = $0.50 per unit

3. Calculate the fixed costs:
Fixed costs = Contribution margin per unit * Break-even point
Break-even point is the point where there is no profit or loss, so the fixed costs are equal to the total costs at the break-even point. Therefore, the fixed costs represent the cost that is not dependent on the output level.

The degree of operating leverage = Contribution margin per unit / NOI

Rearranging the formula, we get:
NOI = Contribution margin per unit * Output level * Degree of operating leverage

Plugging in the values we have:
$5 million = $0.50 per unit * 10 million units * 4 times

Now, we can calculate the fixed costs:
Fixed costs = $5 million / (10 million units * 4) = $0.125 per unit

4. Calculate the variable costs:
Variable costs = Contribution margin per unit - Fixed costs
Variable costs = $0.50 per unit - $0.125 per unit = $0.375 per unit

Now that we have the fixed costs ($0.125 per unit) and variable costs ($0.375 per unit), we can determine the break-even point in units of output. The break-even point represents the point at which total revenue equals total costs.

Break-even point in units = Fixed costs / Contribution margin per unit
Break-even point in units = $0.125 per unit / $0.50 per unit
Break-even point in units = 0.25 units

Therefore, the break-even point in units of output is 0.25 units.

Remember, the break-even point indicates the minimum number of units that need to be sold to cover all costs, resulting in zero profit or loss.