Question

Lester Corporation produces sweatshirts for a selling price of $19.99. Their variable unit cost $12.50. Assigning a fixed cost of 18,725 what is Lester’s break-even point?

Answer 1

To solve this, we are going to use the break-even point formula:
`B_(ev)= (F_(c))/(S_(p)-V_(c))`
where

`B_(ev)` is the break even point in units

`F_(c)` is the fixed cost.

`S_(p)` is the sale price per unit.

`V_(c)` is the variable cost per unit.

We know form our problem that the selling price of the sweatshirts is $19.99, so
`S_(p)=19.99`. We also know that their variable unit cost $12.50, so
`V_(c)=12.50`. Finally, we also know that the fixed cost is $18,725, so
`F_(c)=18.725`. Lets replace the values in our formula to find
`B_(ev)`:

`B_(ev)= (F_(c))/(S_(p)-V_(c))`

`B_(ev)= (18.725)/(19.99-12.50)`

`B_(ev)= (18.725)/(7.49)`

`B_(ev)=2.5`

We can conclude that the break-even point of Lester corporation is 2.5 units.