Question

Mason Company manufactures and sells shoelaces for $2.10 per pair. Its variable cost per unit is $1.90. Mason's total fixed costs are $10,600. How many pairs must Mason sell to break even?

a) 5,300
b) 7,000
c) 10,600
d) 12,000

Answer 1

To break even, Mason Company must sell 53,000 pairs of shoelaces.

Step-by-step explanation:

To calculate the break-even point, we need to determine the number of units that need to be sold to cover all costs. The break-even point is reached when the total revenue equals the total costs.

1. We start by calculating the contribution margin per unit, which is the selling price per unit minus the variable cost per unit:

• Contribution margin per unit = Selling price per unit - Variable cost per unit = $2.10 - $1.90 = $0.20

Next, we calculate the break-even point in units using the following formula:

• Break-even point (in units) = Total fixed costs / Contribution margin per unit = $10,600 / $0.20 = 53,000 units

Therefore, Mason Company must sell 53,000 pairs to break even.