Question

A company charges $12 for a particular item that it costs the company $4 per unit to produce with a daily overhead of $3000. How many items must the company produce each day in order to break even?

Answer 1

375

Step-by-step explanation:

In order to break even, the total contribution margin from the items sold each day must at least equal the daily overhead.

The contribution margin per item is:

`CM = \$12-\$4 = \$8`

Therefore, the number of items 'x' needed to break even is:

`\$8*x=\$3,000\\x=375\ items`

The company must produce 375 items each day in order to break even.