Question

Sport Ready produces sports socks. The company has fixed expenses of $110,000 and variable expenses of $1.10 per package. Each package sells for $2.20. The number of packages that Sport Ready must sell to break even is:

(A) 50,000
(B) 100,000
(C) 150,000
(D) 200,000

Answer 1

To break even, Sport Ready must sell 100,000 packages of sports socks.

Step-by-step explanation:

To calculate the number of packages that Sport Ready must sell to break even, we need to find the breakeven point where the company's total revenue equals its total cost. The fixed expenses in this case are $110,000, and the variable expenses are $1.10 per package.

Let's represent the number of packages as 'x'. The revenue per package is $2.20. So, the total revenue is 2.20x. The total cost is the sum of fixed expenses and variable expenses, which is $110,000 + 1.10x.

Setting total revenue equal to total cost, we get:2.20x = 110,000 + 1.10x

Combining like terms, we get 2.20x - 1.10x = 110,000.

Simplifying further, 1.10x = 110,000.

Dividing both sides by 1.10, we find that x = 100,000.

Therefore, the number of packages that Sport Ready must sell to break even is 100,000 (option B).