Question

May goes to a lot of sporting events - hockey games, ski races, curling, speed skating, and more. Last month, she had an idea. To make it easy for everyone to support the team, she decided to design and order a lot of temporary tattoos with the school mascot. It cost her $20 to design and costs $1.15 for each temporary tattoo. She sells them for $2 each, which means she gets to support the team and make money doing it. How many tattoos will she need to sell before she starts making profit?

Answer 1

She needs to make 24 tattoos.

Explanation:

Giving the following information:

Fixed costs= $20

Unitary variable cost= $1.15

Selling price per unit= $2

We need to calculate the break-even point in units. The break-even point is the number of units to be sold where the costs equal the benefits.

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

Break-even point in units= 20 / (2 - 1.15)

Break-even point in units= 23.53 = 24

She needs to make 24 tattoos.