Question

Pedals of Petals, a bike manufacturer that makes flower-themed bikes, has a fixed cost of $100,000 due to the equipment necessary to make the bicycles. Additionally, each bike costs $100 in labor and materials to make. If each bike sells for $300, how many bikes must be sold in order for the company to break even?

Answer 1

Break-even point in units= 500

Explanation:

Giving the following information:

Fixed costs= $100,000

Unitary variable cost= $100

Selling price per unit= $300

To calculate the break-even point in units, we need to use the following formula:

Break-even point in units= fixed costs/ contribution margin per unit

Break-even point in units= 100,000 / (300 - 100)

Break-even point in units= 500